What is the Value of a College Education?

This is a guest post from Jason Barr, who writes about personal development at Start Being Your Best. Jason is a potential Staff Writer for Get Rich Slowly. His first post described what he learned from failure. Jason is 32 years old, has been married for seven years, and has a 2-1/2 year old son. He’s now a financial analyst, but he spent five years in the army as a Chinese linguist.

What is the value of your college education? It seems as though it is almost impossible to find a job today without one, and even advanced degrees are becoming more and more commonplace. But is it really crucial for “success” (defined here in a financial sense; your definition of “success” may vary) that you even have a college diploma? There’s an argument to be made that it’s not.

The value of a college education
I’m currently saving funds for my son (who’s 2-1/2) to attend college. It’s a daunting task. According to collegeboard.com, the price of a four-year university rises somewhere in the neighborhood of 5.5% to 6.5% a year. It’s actually a higher rate of increase at public institutions than at private. An 18-year-old, beginning their studies in the 2009-2010 school year, can expect a tuition bill of $109,828 for a four-year degree at the average private university in the United States (assuming a 5.9% increase year-over-year). That’s the kind of money we’re talking about here.

Perhaps not. Let’s assume you were able to provide these types of funds for your son or daughter to begin school in September of this year. Four years from now they’ll emerge, debt-free, into the workforce and will secure a job for a salary of $50,856 (adjusted for an annual rate of inflation of 4% assumed for this exercise). Assuming a constant 4% rate of inflation, and salary adjustments to keep up with that pace until retirement at age 65, your progeny can expect a lifetime earning potential of around $5.9 million. Not too shabby, right?

Against the grain
But what if, instead of paying for your child’s education, you provided this lump sum to them in a one-year certificate of deposit, earning the current highest return available (2.24% as of the writing of this article, according to Bankrate.com)? Now the child’s salary would be greatly reduced; the lifetime earning potential would only be $4.2 million assuming the same circumstances as before.

However, assuming that in both scenarios the child in question was able to save 5% of their annual income (assumed to be a lump-sum deposit at the beginning of the year to keep calculations simple), the child with the high school education will have accumulated $646,532 in the one-year CDs by the time they’ve reached retirement age. The child with the college degree would only accumulate $438.132, a difference of $208,400.

Perhaps it could be argued that the child with the college degree could live with the same expense basis as the one with the high school education, thereby freeing up more money for saving and investing. However, I would encourage a recognition of Parkinson’s Second Law, which tells us that “expenses rise to meet income”.

Rich or poor, thrifty or not, the current savings rate as of the end of May for Americans was only 6.9%. For much of the recent past it’s been lower than that, even to the point of occasionally becoming negative. For as many responsible people who are reading these words, there are many more who would be swept along by circumstances and society, spending exactly what they make (or more), year after year.

Public vs. private
What if one were to assume a lower university bill? Perhaps a private school isn’t in the cards for these two kids (and their parents), but a public four-year institution could be.

The current median cost of four years at a public university for the 2009-2010 school year is only $29,021. At that rate, assuming the same parameters as before (rate of salary increase and inflation, etc.), the college grad does come out ahead, but only by $26,090 at age 65. Certainly, that’s a much smaller margin than I would have assumed, and I would guess it surprises many of you, as well.

In fact, for the lifetime earnings calculation to balance (that is, for both the high school and college grad to show the same dollar figure in savings at retirement age), the high school graduate would only need a “head start” fund of $38,030! Just think, for less than the price of a new SUV, four years of college-educated earning power can be rendered moot. This result, frankly, surprised the heck out of me.

Other scenarios could be run, as well. What if you’re not able to provide any funds at all for your son or daughter? My folks didn’t pay for any of my college expenses; I expect many of you are/were in that same boat. One could look at the opportunity cost of college loan repayment vs. a clean slate for a high school grad with no debt encumbrance.

For a graduate of an average private university, repaying a college loan bill of $114,626 at 6% interest (remember, student loan interest is capitalized while the student is in school) will take 10 years and $152,710. That’s assuming they’re able to make the monthly loan payments of $1,273 right out of college, and don’t have to go with a longer-term repayment plan. After this is done, the college grad will only amass $37,272 more in savings than the high school grad, simply due to the long repayment period they must overcome.

Do what works for you
Be sure you always challenge the conventional wisdom. While often times it’s conventional wisdom for a reason, there are often unforeseen circumstances that cause things to turn out differently than one would expect.

Is a college degree a guarantee of financial prosperity over a high school diploma? As with everything in life, the answer isn’t cut and dried. Depending on the circumstances, it’s entirely possible that college doesn’t make sense for everyone, even from a financial perspective.

If you have the ability to provide a financial gift to your child such as the ones discussed here, you may be wise to consider it, in order to provide options for your children that they may not otherwise have. Certainly there are other things to be gained from a bachelor’s degree than just increased earning potential, just as there may be benefits to some kids to go straight into the work force. It’s really important that a child attend college due to consideration of their goals, not just because “it’s the right thing to do”.

For some people, it may not be.

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I started in SUNY community college wanting to study history but didnt want to teach, and to make real money it would take years upon years I quickly switched my major to CIT Networking. During my college career I was also involved in an IT Internship. I did pretty well high B’s on all my IT courses. But really struggled through math, and english due to my learning disabilities. I scraped by in english c- 101 c 102. I got through math 101 c+ but then I hit a road block math algebra 102. I took it in the summer failed, fall semester by itself and got a tutor failed again with 30’s!. By this point I had 60 credits and still had to pass math 102, college algebra, college trig. The burden of this was so stressful it brought me to tears knowing this was the only thing holding me back. I decided to transfer to a nearby four year private college offering the same networking program as a BS with out the hefty math. I did one year there and really struggled in everything besides IT such as logic which I earned a D, and english, which I failed because I lost my english 101 transfering. Little did I know I also had to take one more math class to fill my math requirement…Algebra… Knowing this I really assessed my situation. I realized I piled up 10k in debt and college really was not for me no matter how hard I tried and dropped out. I switched gears after spring 11 went to trade school online, and earned my Cisco Certified Network Associate Certification. The knowledge of networking I learned through trade school went above and beyond what I learned in college. I wish highschools and parents pushed trade schools/bocies as much as college because college is not the one solution for everyone. You can make just as much money learning a trade compared to your peers that just went to college doing the same thing.

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Stanley @ college plan

I strongly believe that a college diploma gives you a much better start than a high school diploma. But I am really skeptical that going to private school means you will do so much better in life as opposed to getting a degree at a public school. It’s not about the quality of education, it’s about your aspiration and personal qualities that will help you achieve success in your career. Many fancy private school graduates never really achieved much in life, so we are talking about a bunch of wasted money.

I think people sometimes forget what college’s primary function is supposed to be–providing an education! True, having a bachelors should help graduates find better paying jobs, but…people, including the students themselves, often forget that LEARNING is also extremely valuable.

Even though I, a senior college student, am not planning to have a career in the field I’m majoring in, I’m still grateful for the diversity of things I’ve been exposed to and the general knowledge I’ve gained. If I hadn’t gone for my bachelors, I would have been a completely different person. I would have been more ignorant and intolerant. I also would not have had the opportunity to flirt with several career options by sampling from various fields, which ranged from Asian studies and political science to graphic design and fashion illustration. I think my college experience has helped me become a more mature thinker, too.

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Amy

I agree. College isn’t for everyone. Particularly, it isn’t for people who prefer to boil a university education down to career training. If all you want is job training in order to earn a higher income than the average high school graduate, go to a vocational school.
A university education is training for life–the ability to think critically and analyze issues in a wide variety of subjects. The potential to get a better job is a bonus. What’s more, the “better” job isn’t necessarily the better-paying one. People who truly value the life of the mind (that is, the people who actually belong in college) won’t be satisfied with a mind-numbing job no matter how much it pays.

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The Sarge

Why doesn’t anyone mention the military? I served six years active duty, learned a new language, received a top-secret clearance, traveled all over the US and the world, and last but not least, served my nation. Oh, and now the government is paying for my maasters degree!! Thanks, US Army!

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Leszek Cyfer

I find it funny that so many commenters are annoyed with shallowness of this post.

Jason wrote about financial aspect of graduating college compared with not attending it at all.

He covered it quite well except for not taking into consideration the grants and stipends that can substantially lower the overall cost of college.

Of course such onesided evaluation is, well, onesided 🙂

The real value of college is incalculable, mostly because it depends on the person attending it, the teachers met there, the contacts established, eyes opened, horizons widened etc, etc.

One thing is sure – the article was a perfect stimulus and spurred very vigorous comments.

I’m sure Jason have profited immensely from your input.

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Education Advocate

Among the things the author left out is the fact that, on average, students attending private college pay about 65% of full tuition. There is often a substantial gap between published college costs and what students actually wind up paying.

Another consideration is that the income numbers assume full employment, which can be especially “iffy” for those without post-secondary education.

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Jim

It sounds like a great alternative to end up at retirement better off for not spending the money for an education. But what about the life inbetween do you have a wife and family live in poverty level. What kind of standard of living could you expect to provide for them. Studies show that you likely will not live as long because you will not have the means by which to maintain good healthy life styles. I agree with a previous post where is the critical thinking there is more to life than retirement.

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Jen

Quick: how many people do you know with at least one degree who have been laid off in the past year, through absolutely no failing on their part? How many people have pursued degrees only to find out, whoops, that field dried up and went away while you were studying to enter it?

Degrees are certainly worthwhile, in many cases. But in some they may not be. And in any case, having a degree doesn’t automatically give you financial stability forever, and lacking one doesn’t automatically consign you to minimum wage. Jason’s point was, there are a lot more factors. Consider them all to make the best choice for you/your kids.

I’m sure someone else has mentioned this before now, but have any of you in the “No, don’t do college” camp tried to find a job that pays above minimum wage without a degree?

Plumbers often make more than people with degrees in, say, English. Sales people can make 6 figures without a degree. Construction workers, hair stylists, camera operators and even “executive assistants” often make quite decent wages for their region without degrees. And that’s just getting started. The only thing that can stick a sensible, hard-working person in minimum wage is a really bad local job market.

The value of a college education includes a long list of intangibles including critical thinking and problem solving abilities, creativity and resourcefulness, the ability to evaluate information sources and to research and articulate your opinions, a sense of accomplishment and self-worth, the satisfaction of pursuing your personal interests in depth, and connections to professionals and colleagues who can a student get ahead.

College is not the only place to learn all that – I learned it from my parents. But ironically, you listed the most important semi-tangible advantage of college last: connections. After all, sadly, it’s not what you know but who you know, and college can introduce you to recruiters and so on.

Although, money is an important consideration, the choice to go to college or not should never come down to money.

That’s a nice ideal, but for some people everything must come down to money because they simply don’t have enough. That’s what I most liked about Jason’s article – it shows that if you can’t afford to pay for college outright and can’t stomach the debt, there’s still hope.

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Lou

Although, money is an important consideration, the choice to go to college or not should never come down to money. Either the student is excited to pursue a career and lifestyle involving continuing education or they do not. If they prefer to take on a trade or work in a job that doesn’t require a degree, then your financial analysis makes perfect sense and college is a waste of time. But, for someone who aspires to earn a degree, continue their learning, and take on a professional career, the numbers are insignificant. I know for myself, a 4 year degree really increased my earnings and lifestyle. However, the most important thing that I got out of college was being surrounded by students and professors of a very high caliber with high standards. It raises your standards and sets you up for life. You can’t quantify that and you can’t really learn that in an hourly retail job, even if you have a large CD trust fund.

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ASW

I’ve seen a lot of articles with the cost benefit analysis of a college education, but they never factor in what the numbers dont capture which is the value of expanded opportunities. My wife is almost done with her degree and she’s either been passed over for jobs or just flat out not even looked at because she didnt have a degree. Not only are the jobs she’s getting lower paying, but they’re also less rewarding than those she probably could have been doing with a degree.

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Laura O.

I have to disagree with #121 (Kay). By the time I was in middle school, I knew that I wanted to be a teacher, and I knew this goal required a college education. In addition, my parents made it very clear that I was going to attend college; this was an important expectation they had for me. The method of payment was never discussed. During my senior year of high school, my dad considered financial aid but quickly rejected the idea because of his take on privacy issues. So, my parents found a way to pay for all four years of my education at a public university. BUT, I truly appreciated how lucky I was to have a “free ride.” I worked very hard and earned excellent grades, and I honestly thanked my parents many times for paying my way for me. In addition, as an undergraduate student, I had some of the best times of my life. I am now a teacher, and although I do not make gobs of money, my college education was DEFINITELY a great investment, and I know that my parents do not regret it. Just realize this: not all teenagers are as shallow and unappreciative as people seem to think.

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Caridad123

This writer fails to look at the big picture. I would not vote for him to be a regular GRS contributor. He knows numbers, but he fails to point out other valuable elements of a college education.

The value of a college education includes a long list of intangibles including critical thinking and problem solving abilities, creativity and resourcefulness, the ability to evaluate information sources and to research and articulate your opinions, a sense of accomplishment and self-worth, the satisfaction of pursuing your personal interests in depth, and connections to professionals and colleagues who can a student get ahead. All of these are qualities that can help a person get ahead in the job market, but (even more importantly, in my opinion) they make huge contributions to personal quality of life, no matter your income level.

Part of the reason so many college graduates are buried in debt is because they make two faulty assumptions:
1) You can only get a quality education at a private institution
2) It’s impossible to work while attending school

I worked nearly full-time for five years while I attended an affordable state college and graduated with *no* debt of any kind. I am a first-generation college graduate currently pursuing a Master’s degree in Education. I’ll acquire some debt this go-round, but the knowledge and skills I will gain from being in school will enrich the rest of my life in ways that I cannot measure. Big paycheck or not, studying at the college level will always be one of the most valuable pursuits of my adult life.

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JimmyV

Thanks for this analysis, but I would consider an analysis from an economic opportunity perspective to be more interesting. I think over-education has diminished the value of a college degree (too many degrees chasing after too few jobs). A good plumber’s hourly rate is rather close to a good engineer’s rate. This practical knowledge/labor type job will have an increasing hourly rate as more and more Americans chase fewer corporate jobs.

Those are my thoughts on why I will encourage my children to think of all the options after HS.

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Lisa

Hi! To Allen post #138,yes most jobs do pay above federal minimum wage , which is $7.30 an hour , but there are some that do not. My husband makes $11.27 an hour. The medical insurance costs us $162.00 every 2 weeks. He gets 3 weeks paid vacation, plus 6-8 holidays paid , but no sick time .If he were to die the company gives the beneficiuary 1 1/2 years wages & that is not something we have to pay into to get.Lots of people are out of work right now& where he works has had a lay off , but he only has been laid off 2weeks down to 3 days a week & then 2 weeks at 4 days a week & now back up to working 6 days a week.It’s not what lots of folks on here call a high paying job, but we have been able tolive on it with 3 people & one time we had friends who were out of work living with us contributing nothing & still did good. That made 7 people living on $670 every 2 weeks & I know people who have much less. We feel God has blessed us to be able to have all we do. We have no credit cards & never have.We have 2 cars which have no payments & are a 1999 Chevy Metro , which gets 52-55 MPG & a Mercury Sable 1996 , which is larger & still runs good. Of course, they need repairs sometimes ,but that’s still lots less than new payments & higher insurance with new cars.The only debt we have are 2 bills , 1 hospital & 1 dental which are paying on & they total around $3,300 .I buy clothes at yard sales. We have several computers . They are older & slower but am able to use them& got them free through helping out at the computer club & someone gave me one they didn’t want anymore.We do rent ,but that has it’s advantages too. We are free to pick up & move if we want to, no maintenance for repairs & no property taxes.It works pretty good for us. Tell me some of how you live. Blesssings, Lisa

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Anca

While I can understand that for this blog, approaching this question from a purely monetary viewpoint makes the most sense, I was hoping you were going to discuss the non-monetary value (if any) of college.

I attended one year of private university, one year of community college, and three years of public university, which I’m guessing is a pretty unique experience. But for a nation where we directly foot the bill for our education, we don’t have enough debate about the purpose of college…is it about learning a smattering of subjects? sharing the “college experience”? developing a skill with which you can directly transition into a paying job? Which of these is worth the hefty price tag? How much learning can I more cheaply accomplish using library books?

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Carla

@Allen #138 – I’m in the “no, I don’t have a college degree” camp and I’ve made way more than minimum wage. On the other hand, I never made more than $60K (San Francisco wages) and never graduated out of the assistant position.

If I go back to work (on disability now) there is no way a fast food joint would never hire me, but moving out of the assistant role would be just as difficult. Its not black and white.

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allen

I’m sure someone else has mentioned this before now, but have any of you in the “No, don’t do college” camp tried to find a job that pays above minimum wage without a degree?

Did the calculations above factor in health, or vacations, or medical coverage, or happiness? I’m not saying more money equals more happiness, but would you consider it a lie that the majority of 55 year old men working in a MacDonald’s are not happy?

I find this article troubling to the extreme in it’s attempts to over simplify this equation. It’s nearly impossible these days to find a good paying job without a college degree, in America.

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Ashley

If all you are concerned about in life is money then yes maybe this is the way to go, but one of the recurring themes here at GRS is that experience are worth more than stuff. I made it out of 4 years of college and one year of grad school with about 70,000 in debt, but I loved all 5 years. I met incredible people that I will always be friends with and had experiences that going straight into the work force would not have given me. I also have a very satisfying job that I could not have gotten without my degree, and not hating going to work every day is worth all of the money to me. I went to a public school, but one that was out of state, becasue I believed it was the right fit for me, and never regretted it.

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Joseph Scandura

Higher education is over-emphasized. It’s nice to think that everyone needs to go to college, but college or post-graduate work isn’t suited for everyone. When everyone pursues a higher education, the pool of talent invariably gets watered down. Graduating everyone from college only means that the degree standards have to be lowered to ensure that everyone passes.

Most people go to college for a better job, but college doesn’t prepare you for the working world. There are tons of classes with no applicability to the working world but which are still required anyhow. It’s a messed up system that just puts people into debt and wastes time.

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Shana

Wow. I couldn’t disagree more with Conrad (#134). My gen ed classes, while they seemed sort of pointless to a college freshman eager to get on with her upper-division science, ended up being some of the most satisfying, mind-broadening, interesting classes I took. I wouldn’t go back and avoid them if you paid me. I’m a firm believer in the importance of gen ed classes — they make for a well-rounded individual, which is critically important (a darned far cry from a “waste”).

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Conrad

GENERAL COLLEGE COURSES – THE BIG RIPOFF !!

Anyone who has a 4 year college degree knows the first 2 years are spent for “General College” classes like geography, economics, history, etc. and those classes are a WASTE if you are seeking a basic degree in liberal arts or even a specific degree in the sciences.

I have a 4 year degree in Chemistry which has served me well over the last 15 years, but if I had to do it again in today’s world, I would have chosen a good 2-year degree at a community college. It would have cost less than half, I would probably make 80% of my currently salary, and I would have started my career 2 years earlier- ALL POSITIVES!

I am responsible for hiring people at my job, and I can tell you that the 2-year degrees are now more popular than ever and you still get a great education.

Wish I would have been smart and cut my education in half!! Thank goodness I didn’t continue to a master or even worse a PhD.

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Bridget

Very interesting article and comments – now to add my 2 cents.

First, I think the answer to the question is “it depends.” While you offer essentially a “life-cycle costs analysis” with a quasi-‘net present value’ of college versus no college that favors no college or a neutral stance, you don’t do a good job of outlining your assumptions, which might be skewing your answer. Some of these assumptions have been brought up, i.e., it looks as though you assumed a liberal arts degree. I’d like to see the same for a technical or professional degree with comparisons. As noted by other commentators, it is difficult to near impossible to practice in engineering, medicine or law without the prerequisite education, undergraduate, masters and post-graduate. You also didn’t include possible scholarship opportunities and how that might reflect in your analysis. Additionally, many community college systems have reciprocity agreements with the state universities that allow someone with an associates degree to matriculate to the state university for a follow-on bachelor’s and beyond. Also, what about getting an associates degree or technical vocational certificate – how about comparing those? I know that some ultra-sonographers, or radiation therapists can make good earnings over their lifetime. The former are examples of vocational programs which I find in US society lacking due to the emphasis on a college education. Perhaps that might have helped bolster your argument.

In reply to the commentator that said they went to college to out of a genuine desire to learn – as an engineer, I also went to college out of a genuine desire to learn, and took English and several other liberal arts classes while meeting my engineering degree requirements. In fact, most degree programs require some broadening outside of their core curricula. I learned a specific way to solve problems and where to find information to help me solve those problems. Education is a life-long endeavor. Assuming those that didn’t take the path you did weren’t doing it out of a desire to learn is naive.

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Chris

If you are going to college simply to train for a job by all means do the calculations and make your plans accordingly.

Because the degrees that I pursued were not neccesarily the ones that get you into high payng professions, I would have to say that college was probably a wash financially. But in terms of life satisfaction, it was worth every penney. I learned about subjects that I would have had a difficult time exploring on my own – statistics, various sciences… I also learned some ways of thinking that I wouldn’t have on my own – the scientific method, looking at data critically etc.

I think everyone who is the least bit interested should go to college but not so that they will be financially richer, so that they will be intellectually richer and better citizens.

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Brint

Here’s a practical example. When I was hired by a fortune 100 company for tech support back in the 90’s, I started as a temp. Another guy with more experience had been temping longer. We both got hired as employees. I was brought in as a level 4 because I had a degree. He was a level 2 because he didn’t. I switched to development, so did he. Starting two rungs down has definitely compounded for him over the years and I expect he still makes less than me even though we do essentially equal jobs. If I leave, not having a master’s degree will hurt me in the same way.

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ChicagoShane

+1. Insightful. Unlike my reaction to the post that explained to everyone that attending an expensive private university puts you in a financial hole, this is a thought provoking article that makes you reconsider your preconceptions about a college education.

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kenyantykoon

i think a college education is highly overated. i am currently in my second year and i cannot see myself working in the field i am studying for. not to mention the job scarcity. so many graduates are taking longer and longer to get employment and some that ate lucky to get one are stuck in dead end jobs. i want to be an entrepreneur and i have a few ventures in the works instead of staking my financial life on an unstable job market

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Wayne

While I agree with some of the conclusions of your article, such as a college degree is not for everyone and should be carefully considered, I don’t think your analysis works from a purely financial standpoint. You are comparing the amount saved for retirement under the two scenarios as though that were the only financial return. I agree with you that those who make more are not likely to save more. But they still make more and whether it is saved or spent, they receive the benefit from it. Your analysis took into account the 5% that was saved, and ignored the 95% that was spent. The 95% that was spent still provided a better house, more vacations, nicer seats at the opera, bigger BBQ, or whatever it is that the college grad valued enough to spend that extra dough on.

The return on investment from the college degree is found by comparing the initial investment of $109K with the additional salary earned over the life of the investment. When I consider the additional income year by year as a benefit, and also the opportunity cost of the salary missed for the first four years while in college as a negative (or an additional investment), the rate of return on the $109K is about 8%. If we ignore the opportunity costs and only compare the cashflows from year five on it gives us a return on investment of 17.5%!

Another way of looking at this is that if someone told you that for an investment of $109K now and additional investments of $30,732 next year (the salary not received because you are in college writing papers) and $31,961 in the following year, etc. for four years, you could purchase an annuity that would pay $14,904 in year five, and $15,500 in year six, etc. through age 65, would you want to buy that annuity? It doesn’t matter whether you spend or save the returns, that is a different calculation.

Of course, this simple analysis ignores taxes, which would lower the return, but also ignores that Social Security benefits are also affected by lifetime salary, so the additional cashflows may not end at 65 (not to mention that some people may work long beyond 65 by choice, a possibility that increases if one actually likes their job).

Don’t get me wrong–I don’t believe that more money will bring happiness. I do believe that digging ditches or working an assembly line for one’s whole life probably will not bring a high level of satisfaction for most people.

And, as has already been mentioned, there are a lot of intangibles to consider. But if this is a purely financial analysis, which you have said is your definition of success for this exercise, it is pretty simple. What is the present value of the $109K investment versus the $1.7 million return over the next 45+- years? Of course, if you only spend $20K for college, which can be done, the return is even better. And the intangibles are normally (though not necessarily) all on the college side.

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SchoolSup

As a superintendent of a large school district I found Jason’s writing to be right on the mark once again. Most of the students from my high schools go on to college, but when I do exit interviews with them it is clear that have no idea of the cost of the school or the impact of borrowing to get to a college degree. Most have never really explored the relationship between the cost of higher education, the earning power of their degree, other possible options besides a four year program, or how long it will take to get out of the financial hole that will graduate with. Many head off to private schools instead of public schools, because the parents want bragging rights even through they are placing their child in deep debt. This continues to be a concern that I often speak to parents about. It is for this reason that Jason’s blog, like others he has written, should be required reading for all of my seniors!

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Kevin@OutOfYourRut

Paul (122)–As “low” as 26% with bachelors degrees might SEEM in the US, it’s substantially higher than the percentages in Europe and Japan. We have no real shortage of college grads, apart from a few specialized fields that most American students shy away from.

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Dalene

Although I appreciate everything I learned in college, I can say that having two bachelor degrees (business and foreign language) has not helped me get a job making more money than someone who didn’t go to college.

Right now I make less money than someone without a college education but has more “experience”- and I’ve been in the work force for nearly 5 years. In my experiences so far, my employers SAY they value a college education, but it is an was not reflected in my pay nor in the requirements of my job or the tasks they give me. But they would rather hire someone that DOES have a college degree, and all the jobs in my field I look for require a degree.

It seems like a catch 22 to me right now. Screwed cos I did go to college, but screwed if I don’t. Perhaps I need a new job.

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Marco K

@120 Ethel

I think you were speaking of my post when commenting on researching what your field would pay at 15 years. Maybe your field is different, but engineering isn’t too hard to look up at least rough figures.

Let’s say you wanted to be an engineer for 10 years, and then broaden your horizon and be a manager soon afterward. Salary.com has information for an engineer at roughly 2 years, 5 years, 8 years, and then information on 8-10+ years of experience in the field in a managerial role.

I agree people are changing jobs left and right, especially nowadays. But in my situation at least, I wouldn’t go from engineering, to say sales, finance, chemical research, etc. I would definitely move jobs as opportunities presented themselves. However, I would stay in the realm of mechanical engineering.

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yoyoguy2

i’m pretty surprised this seems to be a favorite writer.. I liked jason’s previous post, but this one is terrible. the math isn’t clear at all, and it makes terrible assumptions about income levels… who graduates from college, gets a job, and receives nothing more than a cost of living increase for 40 years? in the 3 years since i graduated from college my base salary increased over 45% due to promotion out of an entry level position. how can you claim that someone making 60% more take home than someone else will save at the same rate? how can you completely discount quality of life from a different job? i’m all for someone not going to college if they have a different job calling (vocational school especially, or military like the author took, these are both excellent career choices for some people) but the financial justifications here are at best not convincing, and at worst totally false.

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Paul in cAshburn

When I taught undergraduate non-traditional students, I used to break the ice in the first class by asking them what they hoped to get from their time spent in college. Most of them stated they were there because they wanted to make more money at work and needed the degree to move up their company’s ladder. At the time (in 2005), I believe the statistic from the Department of Labor was that only around 26% of adult Americans have Bachelors degrees (so clearly college isn’t for all, or even most), only around 7% have Masters degrees, and only around 3% have professional degrees (PhD, MD, JD, DVM, etc.) (Note that the 7% and 3% are part of the 26%, not in addition to it.) That said, aside from the money, what about the satisfaction that a graduate feels, knowing they’ve achieved something that few others have completed? Self-esteem has been vastly overhyped in the last 30 years, but I find that people who believe in themselves succeed in life. Success breeds success. 🙂

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Kay

Neither my husband nor I have a college education. Out of four children, only one has gone on to complete a higher education degree. Two are of college age right now. Both of them began but quit after not being sure what they wanted to pursue in the way of a major. They are both working in a great field right now and earning a good living – upwards of $20-$30hr. with a lot of overtime. They may return to college but it will be with their own money and with their plans certain so that the money they do spend will be worth it to them.
That is basically what Jason seems to be saying here – be sure you know where you’re going and then it will be worth it no matter which way you choose. I believe you will work a lot harder on an education if you have to pay for it yourself and if you are the one who made the decision to attend college. Good comments and thought provoking post Jason.

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ethel

People clearly like to give out anecdotal evidence in this thread. The stories of people you know who don’t have a high school degree and make six-figures are the equivalent of the person who exclaims, “My 90-year old grandmother is as healthy as a horse, and she still smokes a pack a day!” While that may be true, I wouldn’t give my 16-year old cigarettes. I also wouldn’t tell them, “You know I cashed out your 529 when you were 6. We just didn’t think college was for everyone, so we decided it wasn’t for you.” This is the problem I have with this article. It’s talking about parents saving for college for their children, and then makes the claim that college isn’t for everyone. But what parent is going to decide, when their child is young, that they won’t open that 529? I understand that not every 18-year old is ready for college or even should go to college. But I can’t imagine a parent deciding that for their child at the point when the parent would be considering opening a 529. Again, when people say that college isn’t for everyone, they are talking about someone else’s hypothetical kid; they are not talking about their own 9-year old.

In addition, for those of you who keep talking about how useless liberal arts majors on (again I assume you mean humanities majors), I urge you to look at real statistics and studies, rather than anecdotes, before talking with your kids about potential majors.

The Association of American Medical Colleges has for years been reporting on medical schools’ increasing interest in humanities majors because these schools recognize that technology is always changing and they want students who can do more than just memorize anatomy. (http://chronicle.com/article/Competencies-Not-Courses/47695) Another poster commented that you should look at the earnings potential of your degree 15 years down the road. We work in an economy where people change career fields–let alone actual jobs–every few years. It is almost fruitless to try to predict what your 18 year old’s major will be worth when s/he is 33. And how many employers have ever asked you about your major in a job interview?

The point of this article really boils down to: it doesn’t make financial sense just to give your kid $100K in tuition costs. You have to raise them so that they will work hard, make connections, get internships or jobs in the summer, etc. I just don’t find that as interesting as other guest posts.

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Mrs. J

And then you have to wonder “Was college worth it?”

I went not for the earning potential but out of genuine desire to learn–thus the English major and not engineering.

I think that the “earning potential” of a degree is useless at this point: I can’t get a mall job because they’re afraid I’ll skedaddle when something better comes along, but I can’t get a *real* job either because my degree is about the equivalent of a doctorate in folding t-shirts.

I don’t regret going to college, but I think people should check their motives and the strength of their desire to study before going. The $18,000 debt I’ve accumulated tells me that much.

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DavidV

I did a media studies degree in undergrad because I expected that I would go to law school. Thankfully I went to law school since that degree, while fun, wouldn’t have done much for me in the real world. It did allow me to get the marks to become a lawyer, so I guess it was alright.

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JerichoHill

While individually, folks may or may not be more or less successful with or without a college degree, the general principle that going to college improves one’s ability to earn money along with increasing life satisfaction has been proven time and time again in study after study.

College, in many ways, is more than just a GPA. I believe it is dangerous, or delusional, to downgrade the college experience (and expense) because of a perception that a small minority of folks can make $$$ without one. Those are exceptions.

Further, the cost of college is overly inflated by commentators and the OP. After 10 years of college, the “sticker price” on those years stands at about 120,000. In actuality, the price I paid was closer to 50,000, and I have no debt from my schooling as I worked throughout.

If there is waste in college spending, it is for an undergraduate degree, where any local college or small university provides a similar level of education than a big private school. Money is well spent at the graduate level and above, but I see too many families sending their children off to a private undergraduate school costing 30K + room and board. My undergraduate was spent at Georgia Tech, with scholarships, a job maintaining bowling lanes, and
being an RA, cost me nearly 0 dollars for 4 years.

There’s a ton of intangible benefits too which are too tough to quantify.

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Kevin@OutOfYourRut

Another thing we may not consider is the question of how many college grads are working in a field directly related to their major 10 or more years after graduation? How many are even still working in college norm occupations?

I’ve known several people with college degrees who found success in non-college fields. A lot of the college degree equalling more money connection may have deeper roots in the desire and ambition of the degree holder than in the degree itself.

Globalization and technology might make this even more pronounced in the future.

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Lisa

Hi! I personally have worked with people who were making a $250,000 salary 5 years ago, who now work in factories making $8 an hour because other jobs aren’t available. They used to be the ones hiring people & other high up jobs.

I have friend who makes around $85,000 a year. Would you like to make that much? He doesn’t even have a high school diploma.He delivers big yard dumpsters for a refuse company.
My husband makes $23,441 a year & just got his GED& he loves this job.
A friend’s daughter is going to go to college & it costs around $27,000 per year at the college she’s going to.Her parents even said they wonder if there will be jobs available in her field when she gets out. I think it will be tough & really expensive.
My nephew ha just a high school diploma & is working for a company that drills oil & gas wells. He talked his way into the job, knowing nothing about it & now he’s a real expeert at it. He makes huge wages.
So the point is, it doesn’t necessarily mean you will make good money just because you have a college degree. Some of the best paying jobs are learn on the job types.Myself I don’t reallythink acollege degree is worth it, but only you can make that decision. I know at least 4 people who are millionaire that you wouldn’t ever know they are & they never even finished high school . Two never finished grade school.
There is a program that can help you get a college degree for less , if you want one. It’s called http://www.collegeplus.org/ . You can check it out to see, if it’s something that could help you.You do a lot of courses by CLEP.Lisa

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Shana

This candidate failed to see the other factors involved in the college decision — something that I’m always very glad to see J.D. do. I don’t think this candidate’s anywhere near as good at analysis of a complex problem or as willing to look at all angles as J.D. is, rendering both his skills less impressive and his conclusions less valuable. Pass.

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leigh

the value of my education (8 years, you don’t want to know how much it’s worth, vast majority paid for by the feds) is not in how much money i make. it’s in knowing that my work will benefit the public. it’s in knowing that i may work a ton of hours, and work may follow me home, but my talents will be used to further advance the health of people around me.

as my next advisor has told me, those who have the ability also have the responsibility to use it.

someday i will probably make decent money, but for now the last 5 years spent scraping by on a pittance of a stipend will not set me any further ahead income-wise than the day i walked out of college with my bachelor’s degree.

with 5 years experience, someone with my bachelor’s degree will be in the same job, because the ceiling is fairly low. i will be moving up as quickly as possible, since the ceiling is far higher for phd graduates. i am not a follower, and i would be miserable in a long-term bachelor’s degree type job in my field. i am always seeking to gain more control over myself, my environment. my degree was intended to put me in position to do that. and i have a little debt to pay, but no regrets for the increased opportunities i have the chance to earn.

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buimom

I’ve sent my 5 kids to private, elite colleges on financial aid. The costs were cover mostly by grants and scholarships.
I am an immigrant, earning just enough to cover our needs in a frugal way. My kids had to do without lots of things while growing up. We had no other debt but education debts. Going to college to us is a life style which enables us to enjoy our lives to the fullest, to broaden our knowledge, to work up our potential. To earn a degree and get a good job are the result from learning for the sake of learning. We are not realistic but our lives are so much richer.
Sometimes, when you think too much on how to get the most for the $ you compromise the quality of life.

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metheus

First off, disclaimer I’m employed by a University, I’ll spare you the plug for my school though.

That said I’d recommend checking out tuition in the Midwest. The traditional farming and ranching states tend to be hurting population-wise, recruiting is paramount for us and prices are competitive. Here, $6k will get you both Spring and Fall Semesters. A 100k debt boggles my mind, then again pay and cost of living are a lot less for us out here, no one said you had to stay after wards though 😛

Shop around, accredited education comes in all shapes, sizes, and price points. An education may be one of your biggest purchases perhaps chosen though at a time in life when people tend to be the least rational in age, choose wisely.

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MoneyGrubber

It’s hard to place a value on other intangible benefits you receive from going to college though. Some of these include: learning to interact with others that may come from vastly different social backgrounds, professional networks, intellectual stimulation from being surrounded by people that are just as smart as you, and of course self reliance after 18 years of living in a nest.

While income potential is fantastic, I don’t think it should be as highly valued as most people make it out to be. I took a year off after I graduated to study abroad through my University, and even though it was a year of lost earnings that could have compounded greatly for 40+ years, I personally would never regret the life experience and friends made.

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David Carlson @ Dinks Finance

Here’s the thing: It’s always parents who mull over whether its best for their child to go to school or not (often before they are in high school). Here’s the thing – the kid doesn’t think like you. It doesn’t matter if you think of some financial theory that would make sense for the child to not go to college. Ultimately they will choose.

For example if they love carpentry, as one of my friends does, they may opt out of college, as he did. This just makes sense to him since it is what he will be doing the rest of his life. It’s his desire. But as for me, I went to college because I wanted to work at a financial institution and you simply cannot get there without a degree.

In the end, your child will choose, not you.

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Elizabeth

Great post Jason – I really like your writing style.

I graduated 4 years ago and now have a job I love – however, it pays the amount of student loans I ended up with per year. I also know that I never would have gotten this job without the degree. I will be paying for it for a while.

Two year schools definitely have their place. I know that because of the way they teach several firms in town will take the community college grad before the University grad because the university doesn’t teach people how to work in the field and they have to train them from the ground up where the community college grads just need to be acclimated to the business.

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Jenny (usagi)

This one has been my favorite so far! Enough that I actually had to comment to get my vote in.

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The Arabic Student

You really have to choose a field that pays a lot to make college worth your time. Liberal arts degrees are money sinks in the vast majority of cases.

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Larry

Good write up, and good questions to consider when you are talking about forking over that kind of cash.

I think it is also important to think about the kinds of opportunities that a college degree opens up. For example. While the average person without a college degree will make less then the average person with a degree I would suspect that the bell curve is skewed towards the lower end of the spectrum.

Meaning you will find fewer and fewer HS Diploma toting folks as you start to climb the salary ladder. You will never find a Dr. or Lawyer (Doogie Howser, M.D. is the exception) who is straight out of high school. If you want to have access to the highest paying jobs the bottom line is you need a college degree. There are exceptions, but they are pretty few and far between.

Likewise as you slide closer and closer to the poverty I would theorize that you will find fewer fewer folks with a college degree. As with the previous example, there are exceptions.

Also this doesn’t seem to factor in a persons earning potential down the road… just right out of the gate. The average American is changing careers several times in their life, not just jobs, careers. Gone are the days (well nearly gone) of get a job and keep it until you retire. More likely you will be promoted (more earning potential), gain new skills (more earning potential), and change companies (could be more earning potential). That is to say the professional ladder is a lot longer (more chances for advancement) then the voc-tech ladder.

So while the difference in wages at graduation may be dishearteningly close, at retirement age you are a lot more likely to have widened that gap.

Lastly, this is an hypothetical sittuation. Ideally you work in the job that makes you happy and pays you the best, and ideally there is a job like that out there for everyone. In the real world you don’t always get the dream job, but part of College is figuring that out. To me there is value in that. I say repeatedly that the best thing I got out of my college education is no my masters degree, but rather the experiences and skills I picked up along the way. The degree is just a happy result.

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David

Guess what…you young American youths have been duped (what else is new)?
The only thing a college education ever meant was to:

A: Fill the coffers of the schools.

B: Provide the skills necessary for the workers (Slaves) needed to work for Corporate America and make Corporate America richer. History records that most of the Robber Barons and founders of the Corporations that ushered in the Industrial Revolution in the U.S. came from Europe with funding from alleged unknown sources ( We know where the funding came from) with little or no education beyond Grammer School. (You know..reading Writing and Simple Arithmatic). In reality…this is all that is really needed if you have the funding and blessing to become one of the so called elite Captains of Industry.

Don’t take my word for it. Do your homework and due dilligence.

For a while this was not too bad until NAFTA.

Now…you suckers,the jobs that were here are now in Foreign Lands provided by the GREED of Corporate America and their overseas divisions. And by the way…these new slaves work for a bowl of rice. How can you expect to compete?

You don’t need more education…you need a pick axe and a march on…well I won’t say where because there are too many places to name.

But keep the faith and endure. Help is on the way.

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Chris

Having attended both a public university for my undergraduate degrees and a private university for my graduate degree, and having worked as an admissions officer for over 3 years, I can personally attest to validity of Jason’s math and truth in his observation. College is not for everyone, and that’s okay. Like anything in life, individuals can have choices and how they learn and grow from those choices can produce dramatic, unforeseen outcomes, both positive and negative. To parents: help your children learn from their own mistakes as well as your own past choices, both good and bad. To children (young adults): listen to those who’ve made choices you’re thinking about making, be open to learning from their choices, and then make your own decision that feels right to you.

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Budgie

I think many universities with expensive tuition are highly over-rated. I think you CAN make a decent living with a 4-year degree earned at a public college that didn’t cost an arm, leg, and your first-born. As an example, my fiance went to a 4-year university with high tuition costs while I went to a community college for two years and then transferred to a public university for my remaining two years. I paid off my student loans easily after graduation. I graduated being only $8000 in debt because of this and a combination of working part-time to pay for the rest. My fiance – on the other hand – Is still struggling to pay off his debt. And I made $10,000 more last year than he did! My degree is in biology/chemistry, and his is in computer science, so our degrees should reward approximately the same salary range.

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liz

I got into a state school, UC Davis, which costs $25,000 a year. But the public school I go to (Sacramento State University) is raising fees by $500 a semester, and it will still only be $5000 a year plus books. Community college and then transfer to this school would be even cheaper. I’m not seeing the concern about high costs here; just choose a cheaper school.

It is definitely important to distinguish between high and low cost public schools. If you’re going to pick the most expensive public school available, don’t be surprised when you graduate with debt!

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TL

This is a very poor thesis.

A few seconds Googling shows that the earnings potential here for both college and non-college grads is way overestimated.

But perhaps the biggest failure is the assumption that wages will keep pace with inflation. That is not the over the past 30 years, and there is no reason to believe that it will be in the future. Moreover, the sorts of jobs held by the non-college educated workforce tend to be the sorts that fall even further behind.

Finally, a college degree is the cost of admission to graduate and professional degrees, which have the highest return in lifetime earnings potential.

This is not to argue that everyone should go to college. (“The society which scorns excellence in plumbing because plumbing is a humble activity, and tolerates shoddiness in philosophy because philosophy is an exalted activity, will have neither good plumbing nor good philosophy.”) But it’s not a decision that you can leave to median wages and interest rates either.

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Kevin@OutOfYourRut

Bob (93)–One reason people might pursue college–apart from money–is the perception that it leads to more money. It’s become the default choice of the masses, and in some socio-economic groups, it’s expected. In the high school I attended, the question wasn’t ‘are you going to college’, but ‘where are you going to college’.

Societal program has a lot to do with it I’m afraid, especially if one or both parents are college grads.

But I have to agree with Tyler (72) that the correlation between college and earnings has become much weaker than it once was. Socio economic background plays a much bigger part, IMHO. I’ve seen too many examples of non-college types either running a successful business, being top salesman or running a department or company.

Ultimately, desire, instincts and people skills will trump education, and the cream will rise to the top regardless of credentials.

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Lisa

Great post – one that hit me on two levels. First, I spent $3500 (books and tuition) over two years in an allied health program. My parents had saved up about $1000 to help me out, but had been very firm: If you want to go to college, you’re going to have to pay for it. So the two years were brutal, but, looking back, it was over quickly. I made $40,000/yr right out of school, with no school loans. Was it worth it? Absolutely.
Now, I find myself teaching in a college in the same type of program. My students will spend about triple what I did but will make a little more than I did when I was starting.
If you’re looking for a solid career without a huge investment, don’t overlook 2 yr allied health programs at community colleges (respiratory therapy, RN, radiography, sonography, etc.).

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RB @ Richby30Retireby40

Yes, absolutely a college education is a key to financial success. It is one of the definite building blocks. Unless you are super gifted, or have some fantastic idea to implement, it behooves 99% of the population to get their degree.

Not having one will hurt you in the long run.

For public schools, there are a ton of them that are great, and I’d rather choose over any private school. These include: UCLA, UC Berkeley, UVA, Michigan, William & Mary in the top tier. You can do anything you want, just at least get your undergraduate degree.

Rgds,

RB

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Charlotte

Hi Tyler K,

You are my favorite commenter on GRS. While I may not always agree with your points, I’m glad you are here.

-Charlotte

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katie

I am really, really happy that I went to a private 4-year college. It was expensive, but the school helped me nail a spot in medical school (which will also be expensive!). I am absolutely sure that is what I want to do with my career and it would not be possible sans a degree.

Don’t forget about the community college option. Some schools offer a really great variety of classes for awesome prices. Some universities – i.e. Harvard, NYU, Boston University – also have *excellent* extension schools that will grant you a degree with very flexible schedules. As long as you matriculate, you’re eligible for aid.

Also, the federal government will loan you funds at zero or low interest if your FAFSA indicates that you need it (but any such loan is only interest free while you’re in school, admittedly). What I find strange, though, is that mortgage rates are lower than the rates on many student loans. What does that say about our values as a society? Is buying houses really more important than being educated?

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Charlotte

Jason,

Interesting post and your calculations make sense. However, I am of the opinion that a college degree opens up more windows for an individual. Even just from a financial point of view which is what this post is all about. For example, networking with people in professional organizations or during university who are likely to help you find good jobs etc.

I would also argue that the earning potential for a college graduate is accelerated faster due to promotions and moving from job to job. I’ve known people being skipped for their lack of degrees.

With that said, I know people who are successful that never went to college or dropped out. I also believe there are many ways to keep college costs down. My brother who is a junior went to a community college for the first 2 years then now dual enrollment at a univeristy and cc while living at home with our parents.

Do what works for you.

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Bob

My wife & I have some grown children and some still at home. Of the ones grown & gone, the college-educated are doing only marginally better that the ones without formal education beyond H.S. My wife has one year of college, I have none. After working for various companies for several years following H.S., I started in business for myself and have never looked back. The income I make doesn’t qualify me as rich but I wouldn’t trade the lifestyle our family has for a college or university educated top management-type or professional position.

Please don’t tell me that higher education isn’t all about the money. If there’s no opportunity to better yourself, move forward, enjoy your life (read: finances needed), then no one would waste the time. And I, for one, couldn’t care less if any of the rest of my younger kids go to college. I have yet to see conclusive proof that it’s worth the time/money for the vast majority of people.

For the HR people who begin culling their lists of potential hires by throwing out the non-educated, may I suggest a different approach. The marketplace needs and rewards initiative and confidence much more so than the meaningless learning from colleges & universities.

I believe Mr. Barr is correct, given the price/quality ratio, college may not be (and probably isn’t) for everybody.

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Jason D Barr

@ Greenman, the quote should be read as “(providing a lump-sum gift) may provide options for your children that they may not otherwise have”. I think you’ve accidently read this quote out of the intended context.

Of course, there are probably a bunch of secret societies that your kid could get involved in with private schools that don’t have chapters at the normal state schools. 🙂

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Eric

Check those public school numbers carefully.

I’m looking at around $24,839/year for my child to attend the University of California at Irvine — as a resident. Non-residents would pay an additional $22,559.

The UCI estimated budget includes $1,592 for personal expenses, $1,445 for transportation, and “rounding adjustment” of $113. It also assumes that the students spend their summers with their parents.

These numbers would change the private/public breakeven quite significantly…

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Jason D Barr

Thanks everyone for the outstanding discussion!

Re: point 2 of @Jac’s comment, I ran into the same issues. My Google-fu has failed me in this area, also. Obviously, this isn’t a white paper or the definitive word on college vs. no college. A few (some of you would say a lot) of things were simplified and held constant to isolate one variable due to the data not being readily available, or this being a quick back-of-the-envelope calculation, rather than through intent to mislead or a hidden agenda.

Thanks again, everybody.

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Greenman

“[a private university education will] provide options for your children that they may not otherwise have”

And what, pray tell, might those be?

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Jennifer

Although I remain committed to the idea of the non-financial value of a college education (particularly at smaller institutions), I appreciate seeing the conventional wisdom challenged.

Although it doesn’t relate directly to your point, I couldn’t resist sharing this anecdote. I have 3 brothers. 2 of us have 4-year degrees, one attended some college but did not receive a degree, and one did not attend college at all, not a single class. Based on that information alone, can you correctly rank our incomes? Hint: The exact opposite of what conventional wisdom would tell you.

There are a lot of factors besides a college degree that affect one’s income. I’m a stay-at-home mom working part-time from home. My one fellow graduate is a missionary. The brother who attended some college is in the military, and entered at a much higher place in the pay scale than he would have with no college credit (and not nearly as high as he would have with a degree). The brother with no college education is an entrepreneur in the music industry, with people-skills coming out his ears. Not only is he a millionaire, but he’s in his second year of TEACHING a college course in his field. How’s that for irony?

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ABCs of Investing

Tyler – great comment.

I think a lot of high school grads would be well served by looking at this post. Even if the “formula” isn’t all that valid, at least it might get them to think about what they will be doing after college.

I think a lot of people (like myself) have a hard enough time figuring out what to take at college and don’t put enough thought into the after-college life.

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Jac

This article seems to rest on a number of questionable assumptions, most importantly
1-the ‘financial benefit’ of a college education can be measured by the retirement savings in cash
2-that savings rates will not vary by income

To address point 1, what counts as ‘savings’? How do rates of home ownership vary by income level? Retiring at 60 with a fully paid off house and an extra $200,000 makes a significant difference. You may have spent some of that other money sending your own kids to college, thus increasing the money they have available to spend on you (medical care, visiting with grandkids, etc).

Point 2 is related. I couldn’t find any figures on how the savings rate varies by income level, but that does not justify the assmuption that it does not vary!

Taken together, in my opinion these invalidate the entire financial argument. Doesn’t mean that going to college is a good financial idea, or everyone should do it, but makes this article pretty irrelevant.

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Erin

I really enjoyed this post, Jason. Looking at the comments, it’s clear you’ve sparked an interesting discussion. You bring up a good point that college isn’t for everyone simply because it’s the logical next step after high school. I tend to agree with Ethel (#32) that college is most beneficial for students who focus on doing well in their courses (regardless of degree) and pursuing valuable internships. For students with different priorities, the overall value of their education will be more of a toss-up.

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Ben

Sigh, ok, let’s start here. Unless you have an unlimited income, you are an IDIOT if you pay 109k for a four year degree. Scholarships and grants should cut this down significantly. Also if your school is 25-35^k/year you should do a year or two at a community college first. Also Jason, obviously it is your choice, but I think splitting college costs between the parents and student is invaluable. This way the kid is not riding your coattails and taking the education for granted. Parents these days are digging themselves into a financial grave by believing they need to cough up the entire amount. I personally know MANY people who paid themselves completely through college. And believe me when they had the choice of drinking or studying they knew which they had paid for. Anyway, I think college is extremely overpriced but there are countless ways to avoid swallowing the pill they try to shove down your throat.

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Ivy

I call bullshit.

While the decision to attend college (or pay for someone else to) is personal, as is the choice of school and major, this article claims to frame the choice to attend college as a purely financial one… but then does a crappy job of running the numbers.

I agree with Jesse (comment 57) who had a whole list of things missing from the analysis: benefits, security, employability, danger. What’s the cost of never having access to medical insurance while working a manual labor job with draconian sick leave policies that leaves your body increasingly broken over the years? That’s what a lot of people (not all, so save your anecdotal evidence) with just a high school degree can look forward to. What’s the cost of having to look for work 10 times as long as someone with a degree because they get the jobs instead of you? Of having to live in a bad neighborhood that costs less… and dooms your kids to attending crappy and even dangerous schools? What’s the cost of having a lower standard of living (Parkinson’s second law can cause problems… but it can also be great)?

No, college isn’t a requirement for everyone. Certainly super-expensive private school isn’t. It’s not just a financial decision. But framing it in purely financial terms requires that you be honest with your finances.

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Bridgette

I don’t think that anything dictates where you go in life more than your ambition to achieve your goals.

You could be extremely dedicated to your field, and be very knowledgeable of it at age 16, then go on to run your own business. There is no need for a person like this to go to college, but its not the norm either.

You could also go to college and get a worthless degree that won’t give you a chance of getting a job, sit on your butt playing video games during the summer instead of getting an internship, and think someone wants to hand you a job because you have a piece of paper from a nice school. It doesn’t work that way, and experience seems to always be a key factor. (and in this case college seems like a waste)

But, in most professional fields, it is expected that you went to college and it does provide a very solid foundation for a career. From personal experience, I can say that WHERE you went to college can be a factor in getting a job (it has been in all 3 professional jobs I’ve had) whether is a personal connection with the person sitting across the table (because you both went there and had the same professor) or just the name of a good school.

That said, college is not for everyone, and I think it would make a lot more sense to push people who don’t benefit from college to go get a technical degree. It seems to be looked down upon in this country but we need those people to make the country run. There needs to be more education on what options are available to high school graduates.

I got a lot more out of college than just a student loan bill. It taught me how to handle finances, speak well, write okay (I am an engineer), develop relationships with people in my field, etc.

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Sam

It’s nauseating that so many advisor type people in the college guidance offices dismiss financial concerns by syaing your after college job will more than cover the debt. It’s a load of ****.
I made a third of what the college councilor had told me – man was that a wake up call. 7 years later, I’ve paid off 20% with out really trying. If I sign up for some college classes & don’t “have” to make a pymt, I still make the pymts since it’ll ding the balance more with no interest accruing. I think I’ve probably taken about a years worth of college classes since graduating in order to broaden myself & qualify for different jobs and I don’t regret my degree or the additional classes. My degree allowed me, a single Mom, to move into a male dominated field. It allowed me to learn some skills that have saved my life (electrical classes).
Feeling like I’m pigeon holed now though & I’m debating getting an accounting degree just to get my foot in the door in other areas. I was a secretary at investment & law firms before & during college but people see all my technology jobs and don’t want to let me in the financial arena. The last time I was laid off I was denied even temp office jobs because of my tech experience. With rumors of lay offs coming, I’m hoping accting might save me there, I know I can do it just don’t love it.

The article is good. The thoughts in it are good.

Personally, I’d never waste money on a private school degree unless I had a big scholarship to help with it but we all have different goals. Local & public colleges are as good if not better because of a broader exposure to life experiences – in my opinion 🙂

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Joan

Another thought-provoking article, but this time with a different set of parameters and lots of nuts ‘n bolts statistics.

Obviously, by the comments, the author has stirred something in all of us. Another factor can weigh in, such as if the person’s career is truncated through unavoidable circumstances. Then the CD’s would be more than welcome. Of course, we don’t know what the future holds, but as Jason’s article might suggest, it is wise to look at all the facts, figures and future dreams with a dash of practicality.

Keep writing! I’m not usually interested in finance, having little personally, but I find your topics and style to be excellent–draws a person into the discussion, obviously by the number of comments here.

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kick_push

I consider myself successful without a college degree. There are too many resources out there today for you to become self-educated in anything and everything. Nothing takes the place of common sense and street smarts.

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Hanna

Personally, I really like the style of this author. He is able to write both personal stories and more heavy-hitting financial analyst. Maybe this article isn’t for everyone, but Jason’s flexibility in topics and style would be great for this site.

I do think some people did not get the whole point of the article, which was not say if you should or should not go to college, but rather to encourage everyone to look at the financial side of college as an investment. He is not saying college decisions should be purely financial, but rather it should be at least including in your decisions and that college might not the end all answer to everyone.

Just by the fact that Jason is saving for his son’s college tells us that he does consider college important as long as it is the right thing for his son when he gets to that stage.

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honestb

“Rich or poor, thrifty or not, the current savings rate as of the end of May for Americans was only 6.9%.”

Are we actually supposed to believe that the savings rate does not vary with income levels?

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Hannah

There is a daunting number of comments, so I’m sure I’m not the only one to say this, but the argument presented here seems worthless to me. What you’re saying might be true, maybe college isn’t always the best investment, but it’s not about numbers… going to college is the social norm. Unless he’s running his own successful business or working at a unusually good job, it’s just not socially acceptable for an 18 year old to hang out in his parents’ home waiting for the years to go by so the investments they made for him can grow. As all his friends from high school go off to college he will resent that his parents made this choice for him because they ran some hypothetical numbers when he was an infant.

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chacha1

We have ourselves a little commentroversy brewing in which many commenters are, it seems to me, deliberately not getting the point that the author was making, which is that every individual is going to have a different motivation for and/or response to higher education and that one should consider it as an investment, as well as for all of its other potential benefits.

The type of higher education you choose is extremely important to your longterm financial well-being. If you are determined to study literature, you had better be a stellar high-school graduate and be willing to take on all necessary debt, because the only way to make a living in literature is in academia and you’d better have a top degree – and you’ll need a Ph.D., so we’re talking 8 to 10 years of study.

If what you really love is customizing cars, though, then vo-tech is the way to go – you can learn all the mechanical, electrical, metalworking, drafting, and design skills for a fraction of the cost of a university degree, and
earn a very good living. Maybe even get your own cable show.

I am one of countless liberal-arts majors now working random office jobs. I needed a BA to be considered for my first legal support job. It paid $13K and I worked in the file room. I had all the skills I needed for that job at sixteen, but couldn’t have gotten it without the BA.

Unfortunately, the BA didn’t provide anything except for that open door. It’s hasn’t been worth a dime to me since, and I wish I’d studied something else.

So yes, that degree is an investment and it should be investigated objectively just like any other investment.

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Pro2Pro Network

This was a great topic to discuss! As many others have mentioned, college is no longer reserved for an elite and motivated group of high school graduates. Everyone is more or less expected to attend college. Because so many 20-somethings have a degree, finding a job is more difficult and competitive. This leaves new grads fighting for job openings. So it’s basically left up to luck. Your future and the value of your degree is determined by employers!

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Todd @ Personal Finance Playbook

I agree for many people, there are better financial alternatives than going to college. I know a guy who studied broadcast journalism that’s a carpenter, a guy who majored in English that owns his own painting company, people who majored in marketing that work at Best Buy, etc. None of those people needed to go to college to do what they do. Ask them if they wish they hadn’t. Ask them if they wish they had crunched the numbers and gone directly into their current field. I’d be surprised if that were the case.

I’m an attorney. Lots of days I wish I had chosen something different to do with my life. I never wish I hadn’t gone to college. It has nothing to do with money. Getting a formal education has value above and beyond that to me. That being said, I know several people that went to college that are well suited to be electricians or auto mechanics. They still may end up there. Going to a university can be a poor financial decision, but it also acts as an unparalelled exercise in self-discovery.

As someone mentioned above, I think it might be best for someone else’s kids;) Good post.

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Tyler Karaszewski

I think a college degree has far less to do with earning potential than the statistics would indicate. Sure, the average college graduate earns more than the average person who never went to college, but that leaves a *lot* out of the equation.

People come from different socioeconomic backgrounds, and this influences their ability to go to college, but also their ability to fit into the class of people that have college available to them almost as a foregone conclusion. Take four people as a test case:
1) The child of an upper-middle class family. Parents were a doctor and an engineer. Goes to college at 18, graduates with a degree in History.
2) The second child of the above couple. Graduates from high school, goes to college at 18, majors in computer science, does well, but drops out at 20 after being enticed away by a software startup company who thought who was just too good not to purse as an employee.
3) The child of a single mother grew up on welfare. Lived in an urban ghetto. Growing up, the people he knew that were “successful” had full time jobs unloading container ships down at the docks. His less-successful acquaintances tended to end up in jail on gang-violence related issues.
4) A child that grew up in a similar situation to child number 3, except through a bit of luck and some harder work in school, he ended up going to a four year university and getting a business degree.

Who do you think, of these four people, is mostly likely to earn the highest income? Do you really think that the presence or lack of a degree is the highest correlating factor with the success of these four individuals?

The opportunities available to us are often limited more by our knowledge and perception than by any real-world limitation. For example, I personally wold be absolutely comfortable applying for senior engineering jobs at Google or Microsoft. This is the world that I live in, and the pool of jobs I’d draw from if I was currently job hunting. However, I would have *absolutely no idea* how to even apply for a job unloading cargo ships down at the docks. I wouldn’t even know what to find the name of a company that employs people to do this. In my examples above, the third and fourth individuals would grow up far more comfortable with this sort of job-hunting than the first two individuals, who would be more accustomed to the type of job-search I’m comfortable with. Individual number four, who managed to get out of the ghetto and earn a degree, may still find it much easier to fall back to his roots when looking for a job, and even if college made him much more comfortable with the idea of applying for upper-class jobs, he still may be much more nervous going into job interviews with his own background rather than the background of someone who expects to be able to land this sort of job.

College correlates well with having been raised in a middle or upper-middle class family, and I have a feeling that salary also correlates well with the sort of environment in which you were raised, maybe nearly as strong as it does with a college degree. I’d also guess that college dropouts — people who had the opportunity to go to college, started and for whatever reason didn’t finish, probably make *significantly* higher salaries than those who never had an opportunity to go, simply because they come from backgrounds where the sort of jobs they’d think of looking for — the jobs their parents held — are higher paying jobs than those available to people who could never have even considered college.

College is useful, but it’s not the only indicator of what salary you may or may not make. It’s also not the only way to get a job, nor even the best way, probably. Experience has always and probably will always matter more than a degree in “practical” fields like engineering and construction, and I can’t imagine any company in these areas seriously rejecting an applicant with 10 years of experience and an exemplary record in favor of a new college grad with a good GPA, unless they’re specifically looking to hire someone cheaper for a lower-tier position. You notice this especially in very high-end positions — when you read about a new CEO taking over at a company that’s been struggling, do the newspapers tell you where he went to school? Probably not, but they do tell you his previous positions were CFO of Wal-Mart and executive VP at Coca-Cola. Your degree no longer matters at all by the time you reach this level, although it may be difficult to get past the first few rungs on the ladder up to this level without one. But, if you do manage to make it past the first few years of a promising career without a degree, it’s less and less likely that going back and getting it will prove particularly useful in a financial sense.

Note that this whole post is biased by my position as the son of small-business owners, and a salaried employee as a software engineer in the silicon valley. It’s probably wrong when applied to significantly different fields, like those in academia.

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Kevin@OutOfYourRut

I have to concur with what my namesake commented at comment #42, the rate of increase in college costs is unsustainable.

10-15 years ago young people were graduating with $20–$30k in student loans, now $50-$100k is no longer unusual. How far can this go? Will it be $150-$200k in another 10-15 years? Will it still be worth it then?

Jason’s analysis based on the numbers may be a foretaste of what is to come.

We also have to ask, what are the alternatives? Some of the trades are now outearning college norm jobs, and at far lower up front costs because so few are entering them.

Meanwhile, back in the 60s and 70s a college degree was almost an automatic pass into the upper income ranges, that’s no longer the case in many fields.

This will be a tougher choice going forward…

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Dan Isaacs

Let’s not forget that College is where one learns to hold their liquor. That is a skill for which no valuation can sufficiently account. 🙂

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Cat

This article is only relevant to liberal arts majors and only those that aren’t planning on becoming lawyer/doctor. Everyone in the sciences/math/engineering fields needs a college degree. Even though it’s more of a congrats you passed type diploma you are taught many things you didn’t know in high school.

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Susan

To me, the biggest issue with this article is the assumption that the college grad’s salary will only rise at the rate of inflation over the years. For the high school grad, this is a lot more likely. Many jobs available to high school grads have ceilings that one would need to be exceptionally talented to break through. However, the average college grad enters a career where there are promotion possibilities, and promotion is not only possible but expected. Therefore, the salary will increase substantially more over the lifetime of the average college grad than the average high school grad. Of course there are exceptions to every statement like this, but I think in general this is true.

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Mario

I’m sorry but this is an extremely week analysis of these two options. One large, glaring weakness is the assumption of the wage inflation. As a college graduate, I know that my earnings will increase with experience at a much faster clip than the 3% inflation assumed. How many people get out of college, get a job, and stay in that position for the nest 40 years?

An analysis that would have been beneficial here, is comparison between the rate at which salaries increase for people with a high school diploma, college graduate, and masters grad.

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E

Well I didn’t think the article was that great but the discussion that follows it is excellent! That must say something for the writer.

My parents paid for my first college degree. It was a priority for them personally and they saved for it. They let me go where I wanted, and study whatever I wanted. While I did get a job in my major, and ultimately made decent money, it was not a field that cares about your education. I was fortunate that my school provided the hands-on practice that my employers were interested in, but the true value of college for me was learning how to live on my own, make my own decisions, and live with them. I am eternally grateful to my parents for giving me that opportunity.

I burnt out on that field after 4 years. While temping and trying out a variety of jobs, I got a completely useless masters degree. The subject fascinated me and I enjoyed my classes thoroughly. I loved being surrounded by students who were passionate about learning the material, and not interested in screwing around. I got a subsidized loan with a 10-yr repayment period and a disgustingly low interest rate. I will never work in that field, but every month when I make my student loan payment, I still consider it a great value.

I am now embarking on education once again. Via temping and working for friends I found a field I am good at and could be happy in. My employer will pay for my education as long as I make B’s or better. It will take a long time and be a lot of work, but it will keep me employable in the long run – this is a field that does consider your degree and education. Being free, it can’t help but be a good financial value, but I think it will prove to be worth my time and hard work as well.

Even given all that, I will still agree that college is not for everyone. I am a person who thrives in that setting, but for those who are more aimless, or more driven, or more practical, another route might be more valuable: community college, or trade school, or starting a business. The hard part is knowing (especially at 18!!) what is right for you.

Thanks everyone for a great discussion!

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Brenda

Jesse (#62)
He found the core group of his friends in High School (we grew up in a small town), and most of the rest were found in beach-side bars where he’d party. Had he not gone to college, the vast majority of his friends would be the same.

And the three examples I gave are merely a small fraction of the people I’ve heard of who’ve gotten jobs solely on “who they know”. Sure, it’s all anecdotes, but it’s what I know.

I’m not saying that one should never go to college. I just said it was over-rated. Just because you have a college degree doesn’t mean you’ll get a good job. Thinking that is so, will be a recipe for disaster in some cases. (And yes, I have several friends who are in the same boat as me: college-educated, older adults, who are working retail because they simply cannot find work in their field and lack the connections and great social skills to shmooze their way into a great job).

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Patrick

After 20+ years working without a college degree in fields where everybody else has one. I can tell you, that while the degree does not necessarily increase your income, it does increase your opportunities. Last year I had to do a job search because the contract I was working was ending. I had the hardest time getting interviews for jobs I was well qualified for because I couldn’t get my resume past the filters on the job web sites. The sites didn’t care what your degree was in or where it was from. All they cared is if you have one. If you can, get a degree. You may not get more money in the end, but at least you won’t have your opportunities limited by a check box.

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Kim

I dislike seeing this purely from a financial view. College may not have actually lead me to my current work but it gave me so much more than that. Should we really judge everything by how much money it earns us? That’s just sad.

My husband didn’t graduate from college but makes twice as much as I do. I have a Ph.D. but can’t find a job in my field and work in an office for a lot less money.

Fine. That’s okay. I learned a lot from college, had a great time, might be able to work in my field later, and didn’t come out of it with student debt (just a lot less in earnings during the years I was in school–we relied on his income for those years and I brought in enough to cover school expenses but not a lot else).

College is not for everyone (and honestly, a Ph.D. is a horrible idea for most people–my B.A. and M.A. were great fun but my Ph.D. was misery! Don’t go for the Ph.D. unless you have to, believe me!).

However, judging college purely on finances! Ridiculous!

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Jesse

Brenda, you are arguing against statistics using anecdotes. However your point about your little brother is interesting. Did he meet these friends in college? Weak ties (casual acquaintances and most friends not in our core group) are how we find out about most opportunities. College is an excellent chance to meet other people with access to potential job leads. Regardless of whether he found work through merit, if the connection to his job was from friends he met at college, his story would argue for the wisdom of investing in a college degree.

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Dan K.

I’m a financial advisor and have been through life just like everyone else. I agree with the point that not going to college and getting a smaller wage in the beginning can be beneficial if you save that money. The problem is that most young adults don’t know this. Another thing that I would like to express is that compounding interest is really not what it seems. You need to educate yourself more to get a better rate of return. Yea…you may get a great rate of return of 8%. Then you need to take out the average inflation of about 3% to get 5%. Then if it is in a taxed account, then you need to take an additional apx. 25% off earnings. The true and only way of increasing your wealth is to increase your salary. It’s the most dramatic change and the most beneficial. Don’t get me wrong. I’m sacrificing a lot since I’m young to save, but I also know that my salary per year is the most important personal finance target. I hope you all agree!

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Lisa

@ #54 Eric

Yes, rising costs *every* year. I work at a major public university and we calculate a 9% yearly increase in tuition.

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Brenda

College is over-rated.
Who you know, and how valuable your skills are in the real world is what gets you a good job, not college.

I graduated from a 4-year college with Honors, with a BFA in graphic design. I bounced from low-paying design job to low-paying design job, but was never able to find a good-paying decent job (and the design companies kept folding under me, especially during the dot com boom/bust). I’ve been unemployed in my field for over 4 years now, and doing graphic freelance and working a part-time retail job to scrape by. I have a net income of around 12,000 a year.

My roommate never went to college, nor had schooling outside of high-school. He is a naturally gifted brilliant programmer/computer engineer. He also had the right connections, and earns close to 6 figures at his job, as well as having full benefits and a lot of perks.

My little brother has a college degree (general business), but he took 6 years of partying to get it and graduated with low grades. He has a huge network of friends however, and managed to land a real estate job with a posh company who moved him to Hawaii (all this while the recession was going on!) and is paying him a decent salary. My brother got this job only because of his connections.

So the moral of the story is that college doesn’t seem to matter. It’s all who you know, and if your skill set is actually valued in society (ie, computer engineers are valued since they are rare; graphic designers are not valued since they are common and not needed).

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Cely

I do think this was post was better than the last one by this writer. However, while the college-no college debate is interesting, the post did not “wow” me.

I keep thinking back to J.D.’s recent GRS survey. Results showed that the average GRS reader is a 31-year old woman with an average income of ~$72K (can’t remember the exact number). The two topics most interesting to readers (or at least survey takers) are DIY and frugality. I think all of the above should be kept in mind as the guest writer is selected.

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Jesse

All of the intangibles of the college experience should matter when deciding whether to go or not. However, the purpose of this article is an economic thought experiment, and I think the ideas need to be evaluated within this framework.

This said, I find this analysis to be a gross oversimplification that is both superficial and misleading. If one is to do a cost benefit analysis of the economics of attending university, the following need to be evaluated:

i.) does attending university increase the likelihood of having a job with benefits or a retirement plan? If so, this needs to be costed in

ii.) does attending university decrease the likelihood that one will have a physically dangerous job? If so, non-university wages need to be adjusted to take into account the probability that employees will be injured and lose income

iii.) are there differences in the college grad versus high school grad employment rates? Unemployed people (as far as I know) do not influence formal estimates of wages, but in practical terms, salaries need to be weighted by the possibility of unemployment needs

iv.) relatedly, do college grads experience more job stability? Are they less “disposable” to employers than a high school grad? If so, then again, these periods of unexpected unemployment need to be added to the model

v.) does going to college influence the earning potential of your spouse? People tend to marry people of a similar level of education. All else being equal, a degree should net you a spouse with more education, thus producing higher combined income.

Finally, there are a ton of intangibles that others above have addressed. To add to these (briefly), there is a definate quality of life issue here. Well-being research shows that income does not really predict well being… except for the first 30k or so that someone earns. The mean income for high school grads is right around 30k and you can bet that the median income is lower than the mean in this case. Thus, in this circumstance you would be taking a real gamble that your kids income would influence their well being. There are also other variables that are influenced by education (vacation time, job stability etc.) that exert an independent effect on subjective well being.

All of this being said, I think it is important for students to have a goal, articulate that goal and select a program that is a means to that end. Along the way, college will produce other benefits that are an end to themselves, but when picking a program it is crucial that it is done with an eye on the future.

Also, I would strongly suggest that students consider skilled trades programs offered by community colleges or carefully consider the employment prospects for university degrees. Finally, for most jobs the quality of the school may not matter as much as people think. For med school, yes, but if you want to be regional manager of the widget factory, a highly ranked public school is probably equally good to a private school.

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Joe P.

I strongly disagree with this analysis.

By assuming a constant savings rate of 5% for both the college grad and the high school grad, and ignoring all other factors, you’re effectively reducing the difference in degrees to the difference in their savings rates, which by your weekly-paycheck numbers is about $1000 per year. Naturally, if you assume that college costs $30k-$100k and earns you an extra $1k of retirement funds per year, college is going to look bad even without considering four years of opportunity cost.

Problems with approaching the question this way:
1. Ignores higher potential for job satisfaction.
2. Ignores value of higher standard of living.
3. Ignores disparaties in the savings rate; a 5% assumed savings rate does not apply to people who can barely make ends meet.
4. Ignores the disparate value of different majors.
5. Here’s a big one: you assume that the high school grad, having gotten a transfer of a huge sum of money, will save 100% of it instead of 5%. Why is this true?

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Joe

Jason,
Great column. Those are some shocking figures.

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Eric F.

Sorry Jason, but you don’t have my vote for GRS.

Let me declare before hand that you lost my attention in less than 10 seconds. Two words: Half-truths.

Rising costs every year? Tuition of 109 828$? Yeah right. Sound more like a sales pitch from some shady bank salesperson. Where’s the critical thinking.

Public school financing doesn’t work like that. Do you really think that the public would accept such tuition fees to achieve a professional opportunity and a relative financial stability through income? Political backlash would be much more possible. Double-check your information.

Good luck with your blog.

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Adrian

#51 Sir Jorge:

You see,
That’s why Jason stresses that post-secondary education ISN’T for everyone and the decision to take out student loans and attend an institution shouldn’t be taken lightly or forcefully. I, for one, view my University education as a “Positive Educated Gamble” this means that my odds of obtaining higher paying employment are increased, but like everything else in life, NOTHING is GUARANTEED. Thus, it’s a gamble with an advantage.
Mid-way through my second year I began paying back my student loans ALREADY as well as working to cover my current tuition because I simply don’t want to take the chance of ending up both unemployed AND in debt no matter for what duration of time it lasts. I also have a PLAN B, which I feel most young people should consider: “if this field of study doesn’t work out for me or I don’t gain immediate employment, what are my alternatives? What other skills can I utlize to my advantage in order to create income in the mean time?” The way I see it, stack life’s chips in YOUR FAVOR 😉

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Kaitlyn

Great post–I recently graduated from a public, four-year university in Ohio in May, fortunately debt-free. My degree is in a field I am no longer interested in, so I am going to have to go to grad school to advance in my newly chosen field. My fiance had a year left before he would have earned his BA in English Creative Writing. But he dropped out in May–claiming that he was bored and restless and that college was never for him. This summer he enrolled in an EMT-B class at the local tech school and has, for the first time, actually cared about his studies! He’s about to enroll in nursing school in September, with dreams of becoming an RN/paramedic on a careflight team. Had he continued on the four year path, he would have had a degree but no passion and no tools to do what he really wanted to do: help people in medical emergencies. He faced a lot of criticism for his decision, but he is a prime example that college isn’t for everybody and college isn’t the only avenue for success.

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sir jorge

Well, I got a college degree, went into debt with student loans, and my job barely pays me more than my wife. My wife didn’t go to college, she works at Starbucks and makes nearly as much as I do! In fact, in a couple of months I’ll make less than her, and I have a 4 year degree in a competitive field, and living a fairly big city!

I regret ever going to college, Now I’m in debt and broke.

College gave ME NOTHING!

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Jason D Barr

Don’t want to seem too much like I’m trying to justify my opinion, but I feel like it may be important to let everyone know my PERSONAL views on college.

I think it’s an important developmental milestone because the student is learning to act a little bit more like an adult. For all the stories of frat parties and binge drinking, going to college is often a time of huge development for many people in the areas of personal interaction, responsibility, and (if you take the right courses) learning how to think analytically.

Is college the only place this can occur? ‘Course not. You’ll get all this stuff in spades if you skip college and learn a trade, or go into business for yourself. College is just a bit of a halfway-house for this, so to speak. It makes the transition a little easier.

Is it worth the enormous investment of time and resources? That’s up to you (and your kids).

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Eric

I don’t think this is a very compelling article. The point of going to college isn’t to “raise your average earning potential.” Would anyone actually take this risk with their own child?

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Jean

I heartily disagree with your conclusion about how a lump-sum transfer of money can somehow “equalize” the financial outcomes of high school vs college grads. Most of my comments have already been discussed above but I’ll add my take:

1) Jason, you discussed average wages and didn’t take into account the distribution of wages. What I mean is this: what if the college graduate had a greater chance of earning big bucks? Even if the average wages were the same for HS vs college grads, I’d want my child to have a “lottery ticket” for future earnings.

2) I also want to add that social pressure, which can be good or bad, determines a lot of financial outcomes. A key example is marriage, which we all know is a big wildcard in anyone’s financial future. Does anyone here read “Dear Abby”? How many times does a parent or sibling write in about a loved one who is “mismatched” by marrying or dating someone who lacks a college degree? I’m not saying that this judgment is good or bad. Yet, as colleges also educate their students to think analytically, delay rewards, and rise in the marriage market. Something similar can be said for friends and colleagues.

-Jean

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The Frugal New Yorker

I liked the way Jason approached this article, but I think he missed a couple of points: most importantly, what if you want to make MORE than an average income? A BA may open many doors to earning big money, especially in industries like finance. With a high school degree, unless you’re an enterprising entrepreneur, it’s going to be difficult to get beyond the average.

Also, white-collar jobs are considered by many to be easier and more pleasant than blue-collar. The amount of money you earn isn’t all that matters– how difficult or painful it is for you to earn it is also important!

I’m not saying I think that everyone should go for a college degree! I just wanted to point out some points that I think are very relevant.

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Elissa

This article may have an interesting point to make, but it’s drastically and I can only assume deliberately misleading. Not only is the savings rate likely to be much higher for college educated people than for high school graduates, but it’s pretty stupid to act as if the only benefit of going to college is a potential increase in the size of your retirement fund. Maybe your kid likes the idea of having higher expenses, which usually translates into a higher standard of living?

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Marco K

Wow, way to post a controversial topic as your first. I am very pro-college, so it rubs me the wrong way a bit. With that being said, I have respect for you hitting it hard and heavy – and posting it in a (at least decently…) analytical way. Don’t get me wrong, I like “How to find coupons in your area” posts, but this one makes you really think.

Good…
I like the way you looked at it from an investment point of view. Run the numbers and see if the choice is warranted or not. Even on things like college, this step is a must. I personally would recommend college to everyone who could afford it, simply for the great experience, greater knowledge, and better earning potential and job security. If you cannot afford it however, and do not plan on going into a field that is secure and gives a good wage – then it’s probably not the best decision.

Bad…
I dislike your citation of “Parkinson’s Second Law”. It’s true, but not nearly enough to discount the 1.7 million dollars difference between the two earning potentials. Sure, a good amount of that will go to perishables, clothing, nicer cars, etc. But a good portion of that will increase your standard of living and your net worth. Furthermore, I believe that if you took the savings percentage of those with a college degree versus those who do not, I believe the percentage would be much higher with those who have a degree. Thus, your base numbers would be skewed. I say this because of the following idea. If you were earning just enough to have the things you need, your savings percentage would be nil, and you would bring down the national average.

More of my 2 cents…
The biggest thing when going to college, is to research your potential field. What is the average wage out of college, 5, 10, 15 years from now? How about job security? Is it projected to grow? Decline? If you are taking on 100k in debt without a substantial increase in job security and wage – it may not be the best move.

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Sara A.

My college degree was the biggest waste of time and money! And no, I did not just coast through college, I applied myself, worked hard, and went to a highly respectable public school that was supposed to be a leader in my major.

Then I graduated, and found out that my degree was absolutely 100% worthless.

Boo college.

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Tony

I agree that strictly financially speaking, college doesn’t make sense for everyone; but,

It should always be pointed out when having this discussion that college isn’t only about the degree you get and the salary that degree generates. It’s also about the immeasurable life lessons you learn. Socializing with others, learning to live with others, experiencing diversity (especially important for those from rural areas), networking, budgeting, etc.

These are skills that benefit anyone, no matter what they decide to do upon graduating.

Personally, my degrees have benefited me greatly from a financial standpoint. But it’s the life lessons I learned at college that I could never put a price tag on. I think everyone deserves to have those experiences. Having a degree never hurt anybody. Not having one has hurt many.

Another problem is it’s next to impossible to determine whether or not college makes sense financially for a child after high school graduation. In my opinion, better to error on the side of caution, a college degree being the side of caution.

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Kevin M

I’ll encourage my son (and future children) to either 1) try community college for a year or 2 as a cheaper route or 2) take off a year or 2 (or more) to work and see if college is really for them, rather than making it the default choice out of high school.

Also, I feel that 6% tuition growth is unsustainable. At some point, college will just become too costly for what you get. We’ll see a return to the trades and other fields that don’t require a college degree. The previous staff writer audition mentioned having $100k in student loan debt – and might take 20 years to pay it off. That’s no way to live – even if he did go to his “dream school”.

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Sheila

My daughter went to college right out of high school just because that’s what everyone did, and I paid for most of her expenses. After a semester of straight Fs, that was it for both of us. Fast forward through 7 years of low-paying jobs and a stint in the military (no school benefit), she’s back in school on her dime and with a goal and plan of what she wants to do. My plan is to help her after she gets out by paying off some of her loans (she doesn’t know this).

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Adrian

I believe Jason’s comment at #14 nicely sums up the basis of his entire article. I do not believe he is being anti-post secondary education, he is simply getting people to look at both sides of the scenario; to broaden their horizons. Let’s face it: forcing kids to go to university for reasons other than their own desires and rack up thousands of dollars of debt, meanwhile a certain portion drop out, another portion don’t even get into their field, and a large amount are left with horrendous student loan debt requiring them to live like college students for years afterwards is not a pleasant thought, and is certainly NOT a positive way to start out young adulthood for those individuals.
Post-secondary education does infact open up more doors in regards to employment, but if it doesn’t fulfill the individual and they detest what they do, it simply isn’t worthwhile. It is all about following your desires, your dreams, and your aspirations. Being a senior psychology/ sociology double major I have seen many a student leave the field to pursue other endeavours. While I wince at the student debt some may have accumulated, I realize what suits some does not suit everybody. It all depends on YOU and what YOU want. Nice article.
PS. I have to second commentary #10: I find it odd that the last potential GRS writer that mentioned college was so heavily critised, yet this one is not? I personally think both are good 🙂

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AJ

I have 110k in debt from a great school. I am still struggling though. It will be worth it depending on what field I go into.

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Monique Tilford

Hi there J.D. —

Seems to me that Jason is a really strong contender for that new post at Get Rich Slowly with this entry. His writing demonstrates a depth of inquiry, willingness to question conventional wisdom, and ability to “crunch the numbers” that will make him a valuable commentator on personal finance issues. Thanks for this piece! Monique Tilford, Co-author, Your Money or Your Life

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amanda

Money isn’t everything- you have to consider your ultimate satisfaction with your career- maybe you can make a great living without a college degree, and maybe you’ll be very happy without that degree. But maybe not- maybe you want to spend your life in a field that requires a degree, even if your pay is the same. Also, it seems that good paying jobs without a college degree requirement are increasingly more difficult to find. There is something to be said for job stability. I agree that college isn’t for everyone, but the economics of the situation aren’t the only factor.

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Robert W

I appreciate the math background behind this and how the difference of four years in the beginning can really make a difference.

However, I guess I’d definitely stress to folks the importance of how this may not work for you — many people can’t even get the job they want without going to school (in particular my wife and I, she’s in med school and I’m in grad school for engineering — we’re going to ‘start’ life with hundreds of thousands of dollars in debt!)

But still, the conclusion is surprising that college grads may not come out as far ahead! However, both results hinge on people being wise stewards of their money and SAVING. Something that I didn’t think I wouldn’t know right after high school, let alone right after college.

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Eden Jaeger

I think ethel (#31) is really hitting on the keys here. For the person who just wants to show up, party, and barely survive with a degree in hand, the investment is more likely to become a poor one. For the person who takes it seriously, and actually tries to learn and get to know like-minded folks, the investment is likely to pay huge dividends.

I’m assuming that costs and debt are minimized whenever possible though. Starting your career with a $100K debt load isn’t going to set you up for success any time soon.

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ClaireTN

I agree that college isn’t for everyone, but think it is a serious mistake to evaluate the value of going to college primarily on the basis of earnings potential. A liberal arts education gives students an opportunity to engage life’s biggest questions, to sort through their own values, and to hone their skills as critical thinkers. Regardless of what career you end up in, there is inherent value in learning to appreciate the arts and fine literature and in understanding the basic framework that informs the natural and social sciences. The dollar is not the measure of all value.

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FinancialTales

I have a strong belief that a college degree is a critical component to financial success since we know that college graduates earn more income than their non-graduate peers. It is a type of filter for future employers that begins when the student completes the eleventh grade. I would argue however, that the reasons that motive people to attain their college diploma are the reasons they are more successful and not because of the diploma.

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ethel

For those who are arguing that one should only go into debt for certain majors, etc., do you know which majors earn the most? There’s an inherent assumption here that “liberal arts” (presumably, humanities) graduates don’t earn money, but that law school graduates do. But, of course, you can’t major in “law” or “medicine” as an undergraduate in US universities. And guess what? Most law school graduates majored in a humanities-related field. Similarly, the trend in medical school admissions is toward humanities majors who have taken the requisite science courses. That’s mainly because they realize that applied knowledge is always changing. Think of the leaps and bounds made in technology recently. If you only took classes to teach you BASIC programming in college, you would be in deep trouble now, since it is a completely irrelevant programming language. Trying to anticipate the trends of the economy and job market is as difficult as anticipating the stock market.

One of the biggest mistakes I see my students and their parents make is trying to game the degree market and pick what they think will be the most profitable degree. This almost invariably leads them to settle on a business major, which is one of the most oversupplied and undervalued fields today. I try to encourage my students to major in what they want. They will be much better positioned for the job market by doing exceptionally well in school, and they will be most likely to do well in school if they take classes they enjoy.

For some reason, people ignore the fact that few employers make hiring decisions based primarily on a recent grad’s major. But think about it: in how many job interviews have you been asked about the *classes* you took in college or the specifics of your major? Instead, most employers look at what school the applicant went to, how well s/he did, and any relevant experience the applicant has (which is almost evaluated via on-the-job training, like internships, and not classroom curriculum). Almost everyone knows that most of what ends up being valuable about an employee is learned on the job. Employers are looking for smart, trainable people, not a major.

I know some will dismiss this as touchie-feelie, especially considering the anti-college vibe (again, anti-college when it comes to everyone *else’s* kids–I doubt anyone here is cashing out their 529 today), but the value of going to college is in learning how to think well and articulate what one thinks. Indeed, that can be learned at a variety of schools and through a variety of majors. I can’t urge you enough to let your kids study what they want. If you’re going to put pressure on them, put pressure on them to take it seriously, work hard, and to get connected. An Art History major who has a 4.0 and worked compelling internship is imminently more employable than a business major with a 2.5 GPA who took summers off.

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Tony

Barry: Would you have had the same opportunities if you weren’t enrolled in college? Would you have been on those committees if you were working full-time trying to make ends meet?

I will never discount my college years, just because of the doors it opened for me. Granted, it takes a motivated person to walk through those doors.

I think it all comes down the individual and the importance put on education while growing up.

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James

I am in full agreement with Eden Jaeger here. The education I received while earning my Bachelor’s degree last year, while not related to the work I am now performing has aided me in many other aspects of my life and may yet land me a related job.

Going into college I was the most introverted person I have known and was in a state of great depression that had been keeping me shut up in my bedroom nearly 24/7. Through having to give individual and group presentations in front of the class, being required to participate in seminar or discussion groups, and with my found knack for foreign languages, I found myself.

Being competent in several languages is a marketable skill and it’s one I may never have found in the world of paid employment. I have also become much more willing and able to share my own thoughts in conversations and have made friendships and business accquaintances that I would have otherwise been to shy to approach.

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Foxie@CarsxGirl

Well, I’m a little too far in to back out now, over half-way done with half the debt load… I’m getting that freaking degree!! 😛

That, and my degree should allow me to go and test for the CFP designation. After that… Well, I can go work for somebody or work for myself. I plan to do some of both, moving more towards working for myself as I gain experience and network.

I’m hoping that the $50k investment won’t be a waste, but I’m hoping to earn that much in two years of solid, good work. Since I don’t already have a strong entrepreneurial bend, I’m working on that, too. But college is definitely a tough job… I’m just ready to earn my degree and get out. (I ended up taking a year’s break to get my ducks in row, doing a *tiny* bit of traveling, moving and getting married, so I’m a bit behind everyone else my age.)

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Courtney

The point about paying “sticker price” is always overlooked in these analyses. I went to a private college for undergrad and tuition + R&B was $98,000 over the four years I was there. But my ACTUAL cost was only $34,000 – barely a third of the price tag. Add in the fact that only a quarter of my costs were student loans, and only half of that loan balance accrued interest while I was in school, and I think it comes out way ahead of the person who didn’t go to college.

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Eden Jaeger

I wouldn’t evaluate the benefits of college just on a potential earnings basis.

There is a lot that can be learned about life and a lot of connections that can be made in college. Not only that, but even if you don’t end up making a lot more money, the odds are good you’ll be doing work that is more fulfilling and/or at least more challenging.

Though, I would agree that the case can be made against college if your kids already know what they want to do and have a path to get there and/or are entrepreneurs.

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Jason D Barr

@ Anonymous – Thanks for sharing. I just finished reading a book called “Ahead of the Curve”, by a journalist who pursued an MBA from Harvard Business School. In it, he recounted a conversation between a student and a school administrator in which the student was complaining about the treatment he was receiving. “I’m your customer” he said. “How can you treat me this way?”. The administrator replied that the student wasn’t the customer, he was the product.

I found that very illuminating in light of my experiences with my MBA from a well-respected school. Do you find that mentality existing at all universities? I’d be curious to hear your experiences.

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jerichohill

Some issues with this article:

1) Jason, in one part you cite the personal savings rate statistic as evidence of a lack of savings by Americans. From that same article, I explained how the personal savings rate actually doesn’t measure savings. Be careful in how you use it.

2) Jason’s methodology of evaluating the worthiness of college majors treats all as identical in terms of earnings. That’s simply not true, nor a fair way to assess whether college is right or wrong for someone. It should be “Go to college to get a degree in X vs. Not”

3) While the value of a college degree has been diluted in the last few decades (McDonald’s managers now need them), not having a degree carries not only a monetary difference but also a social difference, which can affect monetary issues 20 years down the road.

While it is always good to think about your next best use of money/time, this article I think would lead some folks who are at the margin deciding between college and not with the wrong impression.

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Corinne

I think it’s interesting and useful to look at the “value” of a college education from this angle – whether it will literally pay off in the future. However, it completely overlooks why many people choose to go to college in the first place – not because it will help them make more money, but because higher education is inherently valuable, in ways that cannot be measured in dollars and cents.

Disclaimer: This is admittedly a very privileged position. And I am grateful that I have the ability to take it.

I come from a middle-middle class family and my parents have never been very good with financial planning (which I’m only now realizing as an adult), so I didn’t have any college fund. But I received an excellent merit/need-based scholarship to a very selective, small, liberal arts school. My parents paid what they could, and I’m incredibly grateful and privileged for that, and I took out loans to cover the rest. (I’m about 20k in the hole.)

Is it worth the debt? Absolutely. But not because of the better career or salary I’ll hopefully have because of it. It was worth it because I value learning, I value intellectual stimulation, I value being among peers and professors who can provoke and inspire me.

For me, because of my values, this cannot and should not be measured in dollars. I simply cannot imagine my life without having had my college experience. It’s (almost) like talking about the financial implications of a marriage – judging it’s “value” in terms of long-term financial pay-off. It’s simply not about that. It’s much more important than that.

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Anonymous

As someone who is a faculty member at a public university, I fully support making higher education a priority for all who desire it. I truly love the pursuit of academic inquiry. HOWEVER…

A large number of our students are non-traditional (career-changers, adults, parents, work full time jobs, etc), but the bulk of our students are the traditional young adults going straight from high school. As a generalization, the non-traditional students work harder and are more appreciative of the responsibilities (academic and financial) that they take on while in school. They also tend to make decisions on majors based on long term career viability versus general interest. Probably because their life experience has given them some very practical life lessons.

Personally, I did the traditional route at a public university and a liberal arts degree which, while enriching me greatly as an individual, did not get me far in the career marketplace. Several years into my 30s, I went back for post-graduate work to a private institution and pursued a dream job (and accrued a lot of student loan debt).

As schools battle for enrollment, I have seen a general dumbing down of the curriculum and lower expectations set on the critical thinking skills of students. I advise several students who I wish that I could talk to about leaving academics and pursuing a trade. I do believe that there are folks who would feel more fulfilled and do better financially in positions that do not require a college degree in the trades. But I am expected to keep enrollment a priority and keep these kids enrolled in school just barely passing a general liberal arts program. I am becoming convinced that as colleges and universities move towards operating under business models rather than as non-profits the quality of the education deteriorates and the consumers (students) get less for their money.

All to say, making a high quality education should be a priority in our society. The consumer should beware – there are times when you do get what you pay for and there are times when you may be getting swindled.

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ABCs of Investing

Very interesting post – I love this kind of analysis.

A couple of points:

If you assume that a college degree will get you a “higher level” job then a lot of people would still do it even if the money doesn’t work out.

Assuming you have the ability and the knowledge that the education costs offset the increased income – would you rather be working for $978/week in a reasonably challenging job with a future or $591 in a lower-level less challenging job? I’ll take the better job.

Another factor which I think should be considered is that average wages for college/non-college workers shouldn’t be applied to any individual worker. Sure, a degree will usually help a worker to make more money but there are other traits (intelligence, work ethic, interpersonal skills) which will also work for or against a worker regardless of their education.

For example someone who is intelligent, hard working and has good people skills might do very well with a college degree but will probably do very well without one as well (if the profession allows it). In that case the average wages are not good wage estimates to use. That kind of person might have a much smaller gap in wages because of the college degree which of course would support the argument they should skip college even more.

Alternatively someone who doesn’t have a ton of ability won’t do as well as the previous example but if they can get through college – it might be very beneficial for them to get that degree since they might not have a whole lot of other things going for them.

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Kevin@OutOfYourRut

I’d hate to think that my kids future could be determined by a math equation! But it’s understood that it’s just a very loose metric to aid in the overall decision.

But I think lost in the numbers, however we choose to count them, are the qualities that make up the personalities of those who choose to go to college or not.

For example, the percentage of kids going to college who come from the top 20% of households in both income and assets, is very high. Conversely the percentage of kids from the bottom 20% is very low.

The question needs to be asked, “what are the earnings potential of the kids coming out of the top 20% with or without college?” Just a guess, but probably pretty stinking good! That group would be likely to prosper what ever their education. Personally I’ve seen too many examples of this to believe otherwise.

Still another factor is motivation. A kid who can excel in a venue in which there’s no immediate income is demonstrating an ability to work for delayed gratification, which we know is a quality closely tied to long term success. But once again, is this a quality brought into college by the student, or introduced and trained by the college?

It may be that the success of the college grad primarily owes to the students background and own ethics. I’d say this is especially true once you get outside the majors that are likely to land the grad in a high paying field, like medicine in engineering.

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Barry

I’m not sold on the college degree thing as a financial tool, though I did just finish my degree a few months ago. I got my current job a couple of years before I graduated because I was highly motivated and had a long resume of experience outside of school. I volunteered a lot, held several important positions on various committees, and even ran public office when I was in undergrad. These are what got me my job, not the degree. I did decide to finish, because it makes a great insurance policy against job loss. If things went the wrong way at work right now, I know I’d have a better shot at getting a job in this sour job market having the degree than not. I think *that* is where the value of the degree comes, right now. The job market is so competitive here, the degree is what would get me in the door for an interview; my experience is what would (hopefully) land me the job.

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Tyler@FrugallyGreen

This is such a touchy subject and the arguments for and against it are never cut and dry. I appreciate the article and think that the points made are pretty interesting and relevant.

On the one hand, I agree that kids that are not highly motivated to go to college straight out of high school should not be prodded to attend just because that’s the default logical step now. Not everyone fits that mold and not everyone wants what college has to offer.

On the other hand, if you take away the formal education, the career possibilities, and the expense, college is good, “safe,” environment for a kid to learn how to become an adult. Some could argue it’s worth the expense just for this.

Like another commenter mentioned though, that may be perfectly attainable without actually enrolling in classes and living on campus.

There are a thousand paths a person can follow walking out the door of their high school with a diploma. As much as I think college was a good experience for me, I think it’s unfortunate that we automatically herd everyone that direction.

This world takes all types and someone pushing a broom is just as valuable (or more so?) to society as someone pushing paper.

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Lesley

I am totally in agreement with this article. I may not be a good example, because I pursued a Master’s in mathematics and have been fairly successful, BUT I did it without debt and because it was an area that I was passionate about and had good job prospects.

I have seen so many of my friends do degrees in psychology, sociology, or various Bible college degrees, etc, only to work in retail positions that don’t use their degrees in the slightest, or else go back to study a trade, incurring even more school costs. Or get an undergraduate degree in chemisty or physics, only to realize that in order to do any interesting/high-paying work, they would need to complete at least a Master’s, if not a Ph.D or even post-doc. If you weren’t planning ahead for that, it can seriously derail you financially and in terms of life stuff like marriage, children, etc.

I hope that when our kids get toward university age, we will be able to have realistic expectations. I have to admit that it will be very tough for my hubby (who also has a Master’s)and I not to have a heavy bias toward advanced university education.

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B Smith @ Education 2.0

Jason-These are questions most families struggle with. These is no doubt that a college degree will help you (or your child) get a better job and earn more money. There is also no doubt that conventional college will cost over $56k (average in state tuition). It’s pretty hard to see the payback from such a large expense.

The key is to find ways to cut your college costs. There are several ways to do this: going to community college for your first two years, etc…A comment is too short a space to go into depth, but you can go to our website (or email me off line) to learn more.

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Thom

I think the industry you work in makes a very big difference, as well as the public vs. private route. After attending a private college for undergrad (thanks to generous scholarships) I chose to continue my education with a master’s degree. Living in New Jersey, I had several high priced options, several low cost public options, and Rutgers, which is public but in a higher bracket due to its higher status. As someone with a teaching certificate, I could pay $17,000 for my complete graduate tuition and see an increase in teacher salary between 5-10k a year on NJ teacher’s pay scales. My investment in my education would pay for itself in two to three years. And then I can reap the benefits for years to come, all without any student loans.

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Khürt

NOT going to college might be financially detrimental. My employer will pick first from the pool of job applicants with advanced degrees (Masters) and experience. The person with only a college degree or high school diploma is at a disadvantage. Right or wrong, a advanced colllege degree is becoming the standard for job requirements. Perhaps the high school or college graduate can start their own business.

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Jason D Barr

My motive here isn’t to say whether or not you should go to college. It’s simply to understand what works for YOU and determine your own motives for attending university. Don’t just get swept along by what you’re “supposed to do”.

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Steve S

By using the average numbers to calculate these statistics you are merely pointing out that a lot of college degrees are worthless and campuses have become overrun with kids who go for the experience, not for their career aspirations.

The average salary for an engineer or lawyer is much higher than $50K, thus the equation becomes much more lopsided in favor of college. A liberal arts degree with a salary closer to $40K, however, points out the problem of paying so much and getting so little in return.

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Kat

I agree with the above post that points out WHAT your degree is in is often overlooked. Your passion may be sociology and English literature, but if you aren’t planning on teaching, maybe you should consider a different major. It’s tough to figure out what you want your career to be when you are 18, but I think that it is a failing of high schools that the focus is getting into college and not basic career planning, or skills assessment, to see what careers the students are likely to enjoy. $100k debt may be worth it if you now have a degree that supports a career that makes over $100k a year. Even $20k in debt may not be worth it if you were going into a career that will never make you more than $30k a year…

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ethel

It’s always interesting to me when people say, “Not everyone should go to college.” These people are almost invariably talking about someone else’s kids–not their own. It seems another offshoot of the “Not in my backyard” phenomenon.

One thing few of these analyses seem to include is the amount of students who receive grants, scholarships, and work study money. They also rarely include any kind of discussion of what our economy might be like if we produce substantially fewer college grads. We routinely hear about how the employment sector that has been hit the hardest is the trained labor portion of the economy, and yet people still wonder if college education is worth it. All the while, adult enrollment numbers in colleges across the country are increasing because people want to be qualified for the more secure and expanding employment sectors of the economy.

Finally, I’m not sure why it would surprise anyone that public college expenses are increasing. Americans persistently demand lower taxes, and they routinely target education as a place to cut expenses. This is because I think we as a culture have a very bad idea of how much education costs. When people consider the “cost” of college, they assume that what it “really” costs is the amount of tuition at a public institution. Why then, they wonder, would anyone pay the exorbitant rates of a private institution? Of course, they neglect the fact that theirs and their neighbors’ taxes are paying a portion of the costs of the public college system. If we allow legislators to continue to strip public college education budgets, then I think we will see an even sharper increase in public college tuitions. Because, guess what? To provide a quality four-year education *is* expensive. And I worry about the cost to our society if we keep sending this newly en vogue message that college is like a luxury sports vehicle–nice if you can afford it, but not necessary and not likely to make your life better.

Sometimes a purely individuated economic analysis does not provide a very clear picture. I would assert that the cost of college cannot and should not be analyzed the same way as buying a car. I would offer that it should be analyzed the way that people now realize they should look at their houses–not as candidates for potential “flipping” and a huge windfall, but rather as both an economic and an emotional investment that is not primarily about gain. And people seem to realize this as they say that “College may not be for everyone” while always thinking in the back of their minds “But surely it is for my kid.”

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Kat

This blog seems to be very anti-college. The other staff writer wannabe who said he attended his dream school was critisized heavily in the comments. Why is it so bad to achieve a dream of 4 years at a school that makes you happy and is an investment to your future, but there is sympathy for those that bought an extra $100g worth of house when they could have lived in a smaller one? It’s just a different dream.

Also, I think it would be beneficial to compare the SAME jobs with and without a college degree. Some you NEED to graduate a college to become (doctor, lawyer, engineer), and some it’s just very hard to become now without the degree (such as many professional jobs). So, if you want to be in certain fields, especially if you want to avoid manual labor or assistant work, and still get a “good” high paying job then college may be worth it. College also gives many more options. I’ve worked in HR and recruiting, the easiest cut when looking at resumes is to toss any that didn’t graduate with a bachelor’s degree.

Also, the more common college becomes, and now there’s a huge market for people going back to school part time, then these numbers may change in the future. In 18 years who knows what sort of qualifications you will need. Right now a lot of the labor force is people who were 18 during years when college wasn’t an absolute requirment. When those people retire in the next few decades, then the work force will be mostly people who did go to college, or at least were expected to.

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Jared

I really wonder how this would play our if you seperated it down to colleges within the universities. I graduated a year ago with an electrical engineering degree. My best friend graduated with a philosiphy degree. He was a 4.0 student and now assembles glasses for about $8 an hour. I was a 3.0 student and work as a project engineer making 4 times what he made.

I think for too many, the degree is secondary to the college “experience.” The average high school grad could probably get the same experience by moving to a college town and attending a vo-tech. It will be much cheaper (or here in Oklahoma, free) and after words you would probably be more marketable than many college degrees.

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Jason D Barr

Wow, I felt as though this article may be controversial; not so far! Maybe all the college recruiters read in the afternoon…

@Jaynee – There are lots of things you can do to reduce that college bill, and living at home is definitely one of them. Although, to be honest, I wouldn’t have gotten nearly as much out of college (during the time I was there) had I lived off campus. I personally think that the interpersonal skills, responsibility, and life experiences I gained were much more important than the degree itself.

I understand the concern about funds, though. When I see the numbers I found for this article, I do more than wince.

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Jaynee

The 529 plans we have set up for our kids really took a hit last year, so we know we’ll have a struggle to even have TWO years (one for each kid) of schooling saved up for our kids by the time they need the money, much less four years each. At this point we’ll probably go the same route my husband did: go to a college while living at home. Fortunately, we have 5-6 great schools within an hour’s drive from our house. My husband and I each had different college experiences. I was 8 hours away from my parents and lived on campus at a private university. My husband lived at home while taking classes at the nearby public college. Part of me says, “Send them away! More than a day’s drive away! Let them learn to grow up!” but the other part of my winces at the idea of forking out that kind of money.

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Minderbender

I think it is valuable to have this discussion and not make assumptions that everyone is better off going to college.

I have just been through college searches with two kids in the past 4 years. Tuition figures are scary but can be highly misleading, with most students not paying anywhere close to the “sticker price”. A local private school offers a number of discounts to local students which actually brought the tuition in line with the state university system.

Our state (Virginia)has an agreement with the community colleges that if you achieve a reasonable GPA( I don’t remember exactly what it is, but it is within reason) for 2 years that you are gauranteed acceptance at a 4 year school for the final 2 years to complete a degree.

I read an article last year about a college which was trying to keep its tuition lower than its main competitors, and their applications fell off. People perceived the lower price as being of lower value.
Colleges are viewed as status symbols and it is high time we started using the principles espoused on this site to evaluate colleges on value rather than status.

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Rachel

The thing about all these statistics is that tons of scholarships are given out and there are lots of ways to cut corners. I definately did not pay anywhere near that much for my college education 5 years ago. Students just have to be dedicated to being resourceful.

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Sandy

This is a nice post Jason. Really got me thinking. Things are of course a bit different where I live (Amsterdam, NL) but the same considerations can still be made.

I liked this post a whole lot better than the one you wrote before. Thanks!

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bex

A buddy of mine had a father who made him write up “business plans” any time my buddy wanted something. I believe the first one he wrote was when he asked his dad for a bike at age 9.

That’s a tad extreme… but its probably a good idea to make your progeny do the same before you pay for their college.

You can take that cash you saved for their education, and either put it into a long-term retirement trust… or, you can give it to them that year to pay for college. But… every year, make them polish up their business pan with how much they expect to spend, how much they will earn after college, and expected rate of return.

Both my wife and I paid for college ourselves. We worked in high school, and through college. We knew what we would have to pay back. That “fear” helped us focus on getting degrees that had good return-on-investment…

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Michael

J.D.,

I have to say after reading your guest writers over the past week that it is a close tie between Jason and Karawynn.

Jason,

Great article. I attended private Catholic schools for grades 1 thru 12, a public four-year college, and a private university for my master’s degree. When I left graduate school, I owed about $35,000 and that was 9 years ago. We owe about $365.00 dollars now on that debt. Unlike most debts, educational debt for the most part enables the individual to appreciate in value. This being said, I think those looking to take student loans need to take a reasonable approach to accumulating debt and consider community colleges for their first two years then followed by their final two years at a public or reasonably priced private college or university. I would strongly encourage young people and their families to visit with a NAPFA certified CFP who is fee for service only to determine what they truly can afford and then build a solid plan from there.

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Rob Bennett

I think that part of what may be going on is that going to college has become a largely “passive” activity for many.

In the old days, going to college was special. You didn’t do it unless you were highly motivated to do it. Those who are highly motivated to do things tend to succeed financially over time.,

Today, there are many who go to college just because it’s the thing to do. A good percentage of those probably do not see big financial success over time.

Those who go to college because they are highly motivated to do so probably still receive huge financial benefits for doing so. But there is no guaranty that going to college is going to benefit you all that much financially. The motivation that used to be highly correlated with going to college is the thing that matters.

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